Are you planning for your New Year resolutions? Apart from planning for your favourite resolutions, like losing weight and travelling more, it is important to make some financial resolutions as well.
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Top 5 Financial Resolutions for New Year 2020
Setting up realistic and measurable goals for your finances is the first step towards achieving them. Here are 5-financial tips that can help you start 2020 on the right note
Save More for Bigger dreams
If you want to start your new year in the right direction then the first step you must take is to save for your bigger dreams. Savings for bigger dreams can be anything ranging from saving money for pursuing a course, international vacation, starting a retirement account or saving for a home down payment. Whatever it is, you must know exactly why you are saving for.
Once you know your dreams and how much money you need to fulfil it, you can proceed with your savings plan. If you want to hit a bigger target then divide the money you need by the time you have at hand. For example, if you need Rs. 10 Lakhs for you home-down payment then first divide the amount you need to save each year.
Next, you need a recurring deposit account to start saving the money. A recurring deposit account allows you to grow your money through compounding and gives your goal an extra boost. Since it comes with a lock-in period, you cannot spend it even if you feel tempted. Thus you can save money regularly to give your goal the required momentum.
Focus on the overall investment mix: review your asset allocation i.e. the overall mix of stocks, bonds and cash in your portfolio. Make sure your investment portfolio is in sync with your long-term goals, risk-bearing capacity and time frame.
Diversification across various asset classes: diversification will allow you to reduce the risk factor while helping you to reach your goals. Consider other investments types like mutual funds or ETFs if they align with your goals.
Consider the amount of taxes you pay: you may shift to a tax-efficient investment if you are paying a good amount of your interest income as taxes. Some of the investment options that come with great tax benefits are retirement planning accounts, municipal bonds and ETFs.
Switch towards Automation:
One of the best financial resolutions for individuals who forget their bills on time is automating their savings or salary account. Through automation, you permit your bank account to make your monthly payments on a specified date to the insurer or a loan account. Automating your account will help you pay your credit card bills and loan EMIs on time thus saving you from negatively impacting your credit score. If you have previously missed your insurance payment then automating your account can save you from missing your payments.
Stick to the above 4 Financial Resolutions:
Once you have an investment plan in place, make sure you follow it. Revisit your plan every month and check your progress. Revising your plan will allow you to remain focused and you can achieve your goals easily over time.