8 Financial New Year Resolutions you can start TodayApr 19, 2018(10:14)
1. Chalk out financial goals
All your efforts are futile, if you do not know what you are investing for, what you want and when you want. Selection of investment instruments, tenure, return and approach all depend on the financial goal and your given financial position. For instance, a person may opt for a short-term investment in a debt instrument for purchasing a car in a year. On the other hand, a long-term investment in equity or a monthly SIP would work better down payment of an apartment in a decade.
2. Track net worth every quarter
Investors generally review portfolios once in a while. However, checking portfolio and calculating net worth every quarter is strongly recommended. This includes considering the value of assets, investments, saving, cash and liabilities. Implementing this financial resolution will highlight the performance of certain investments and predict the likability of its meeting the desired financial goal. It is also likely to boost disciplined saving and cutting unnecessary expenditures.
3. Rebalance portfolio
Every investor, based on risk appetite, fixes a ratio for its investments in different investment instruments. Radical movements of the financial market can knock the balance out of the portfolio, disrupting the preferred equity allocations and subsequently affecting the risk involves. Long bull runs bring high returns and increase the value of your equity holding. Not balancing the portfolio in such scenarios can put the financial investments off the track.
4. Prepare for a market crash
Along with balancing your portfolio, you also need to be prepared for a market correction or, in the worse case, a market crash. Market observations say a market correction of nearly 20% is likely every three years. The current Bull Run had started in 2012 and Nifty has almost doubled in value since then. Thus, it is necessary to ensure a good cash reserve for emergencies and balance stock holdings and debt investments, to avoid selling investments at the worst possible time.
5. Create Emergency Fund
An emergency fund is a type of reserve cash, either saved in banks or investment instruments with low to no risk. This fund should be able to cover your living expenses for two to three months. Experts recommend maintaining an emergency fund equivalent to your income of two months to ease the financial stresses in emergencies like loss of job, accident, illness, etc.
6. Check your insurance needs
Your income and expenses grow every year. Likewise, your insurance needs to grow too. Retiring parents, unstable job of the spouse, birth of a child, etc. increase your responsibilities and need for insurance cover. Your insurance cover should be large enough to include your monthly expenses, settle outstanding loans and save for future milestone expenses like education of children. It is advisable to regularly assess your insurance needs and buy additional covers as required.
7. Schedule Monthly expenditure reviews
While planning the financial goals of the year, it is common to miss out budgeting on a monthly basis or losing track of things after a few months. Thus, it is essential to review monthly expenditures and implement changes accordingly. This financial resolution gets easier and works better when these reviews are scheduled to send timely reminders every month.
8. Start using the right tools
Managing finances can get tricky at times. But in this digital age, this should be the last of your worries. There are several applications readily available to help you with this. For instance, some applications track your incomes and expenses, give bill payment reminders, etc. These apps also analyze your spending patterns and give graph representations of your weekly and monthly spent amounts. You can also set monthly budgets and the apps flash reminders when you are overspending.
Taking control of money matters is always important and is easiest at the beginning of the new financial year. With these resolutions we hope it make it easier for you.
Vivek Ranjan Misra
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