Five financial resolutions you must make for the new year

Pankaj MathpalOptima Money Managers

New Year is the time to plan for the future and make a new beginning. Every year we make resolutions that with the noblest of intention, yet we barely keep them. We set ourselves up for failure by setting a goal which is too ambitious and takes too much effort. This New year let’s go ahead and make five simple financial resolutions that’s going to make a world of difference to your finances without taking too much effort.

Get adequate Insurance Coverage To protect your family and yourself against any unforeseen events, adequate insurance coverage is a must for everyone. The two basic insurance policies that everyone should have are health and life insurance.

Health Insurance: Medical Science has made amazing improvements over the last few decades but healthcare has become expensive. To protect yourself and your family against health risk you should buy adequate health insurance. The amount of coverage will depend on your city and type of hospital where you would like to get treated, if needed at all. You can buy an individual policy for yourself or a family floater plan to cover your all family members in a single plan.

Life Insurance: If your family members are financially dependent on you then you must not ignore life insurance. Buy a pure term insurance plan with adequate sum assured.

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Zero outstanding on your credit card Credit cards are the first reason for people to fall in debt. Carrying an outstanding on your Credit card no matter how small can be catastrophic for your finances. The interest rate on your credit card can go as high as 50% per year and we are not even talking about the various fees and charges. For example if you carry a balance of 1 lakh on your credit card you will pay Rs 50,000 interest on the same for just one year. In comparison your bank pays 4% interest on your savings account. While there are a few good reason for using credit card like reward points, cash backs and discounts, these are only meant for disciplined spenders who pay off their full balance every month. Anyone who cannot pay off the full balance at the end of the month should not use a credit card no matter how attractive the offers are.

Plan a vacation When was the last time you went on a vacation? If you did not take a vacation last year, start planning for a vacation this New Year. Maintaining a healthy balance between personal and professional can do wonders for you. Going on vacation with borrowed money is not at all a good idea but planning for vacation is a part of financial planning. Don’t forget to start planning early though. The earlier you start planning the better your experience and it will be a whole lot cheaper too. So what are you waiting for?

Make a monthly budgetMost people spend what they earn and some more. As a result they are not able to save what they should and always worried about their finances. This is mainly because very few make a monthly budget. Start making a monthly budget for the next twelve months and plot all your known expenses. This will provide you a guide of how much you can spend and how much you need to save. For example if your know you have a large expense coming in 6 months you can start saving for the same by altering your monthly budget. You will now be able to pay cash for the expense which would otherwise be put on your credit card. Even the government needs to make a budget to keep its finances in check, why not you?

Get your financial health checkedYou get your car checked and serviced a few times a year but when was the last check your financial health. Lets face it. Very few people can manage their finances effeciently. Most live in constant fear or denial about their finances till it’s too late. Why not visit a professional financial planner this New Year and get your financial health checked? It will help you get an unbiased professional advice of where you stand and if any corrective action is required.

Go ahead and make the above resolutions and see your finances take off this New Year.