Improving
your fitness level, getting that dream job or buying your own house,
everybody has many plans for the new-year 2014. But one of the most
important things that most of you need to inculcate in your resolution
list this year is improving your financial health. Most people plan to
review their financials every now and then but procrastinate this in
lieu of other so called "important" things. And by the time they realise
this it is too late to go back on some of their big mistakes. Hence if
you have not made any plan for a better financial life this new-year, it
is high time you considered working on this.
We have constructed a to-do list which might be of great help to you in this endeavour. - Review your existing Investment Portfolio:
Most people do their investments without proper planning or on
irrational 'tips' from friends or relatives. As a result most of these
investments end up in a mess. You need to ask yourself "are these
investments best suited to my financial goals and risk appetite". If the
answer is 'Yes' then you do not need to review your investment portfolio
but if the answer is 'No' or you are not sure about it, then you are in
a great mess and you urgently need to review your portfolio before it
gets too late; as the longer you hold these the more you will loose on
the returns on your investments.
- Review your Debts: More often than not, people land up taking too many loans in order to fulfil their financial goals in life (such as children's education or marriage,
buying a house or a car, starting their own business or even going on a
holiday). Taking a loan is not bad thing as long as you know your means
to service it. It is also important to understand that having a high
debt-to-income ratio, could have an adverse impact on your borrowing
capacity as well as your financial health. Hence if you have a large
number of loans you must endeavour to reduce or rather endeavour to be debt-free soon.
For this, first assess which debt payments are burning a hole in your
pocket. For instance, you might have certain credit card dues, which
bear a relatively high rate of interest. For the early extinguishment of
your debt liabilities, consider repaying these debts first. You can
repay the high interest loans with low interest ones. This will help you
save money on interest payments. Create a plan to repay your dues and
classify the ones you will need to clear first.
- Create a Budget:
Analyse your monthly inflows and outflows. If your outflows leave you
with very little to save and repay your debt, or worse with no money at
all; then it is high time you started monitoring your spending habits.
Establish a monthly budget for all your expenditures and be determined
to follow it. Curtail all the unnecessary expenditures and save wherever
you can. This might mean reducing all the outings and even
rationalising on the necessities such as food, electricity and telephone
bills etc. Although you cannot stop purchasing necessary items, be a
smart customer. Purchase discounted items, use coupons, negotiate with
the shopkeeper, and plan all your shopping trips so that you can save on
the transportation costs. It goes without saying; don't add on to your
debt by shopping more on credit cards etc. Having extra credit can
sometimes create a feeling of having access to large sums of money and
can lead us to buy things that we really can't afford. Keep track of
every small expense, as it is these small expenses that often amount to
big bills.
- Create a proper Contingency Reserve:
Contingency Reserve is the amount which you should always keep aside
(in a savings bank account or a liquid fund) for any unfortunate event.
Unfortunate events could be medical emergency, loss of job or any other
thing for which you have not planned for. Though you might say I already
have 50-60 thousand Indian rupees in my bank account, but it might not
be sufficient as it is always advisable to keep between 6-12 months of
expenses as contingency reserve which should not be used for any EMIs or
bill payments. Reliance Money Manager Fund with ATM facility can be used for emergency contigency fund.
- Consult your family and decide your Financial Goals:
Unless you know where you are headed you won't get there. Many people
are unable to achieve what they want in life, because they don't know
what they exactly want. So you should sit down with your family, consult
with them and decide what financial goals you should be targeting for
various stages of your life. The financial goals which are applicable to
most of the people are Retirement,
Child Education, Child Marriage, House purchase etc. But the more
difficult part is to decide how much amount you require as on today and
in how much time do you want to achieve these. You should have a clear
vision of your financial goals as your investment in any financial
product is totally dependent on your risk taking ability and time
horizon set for your financial goals.
- Protect your family's Financial Future:
Remember that none of your dreams or wishes that you have towards your
family might be fulfilled if something unforeseen happens to you,
especially if you are the only earning member in the family.
Contingencies in life may occur when you least expect them leaving the
entire family's financial future in jeopardy. Hence despite of having a
fast paced life and many other responsibilities you must remove time to
find out whether you are adequately insured or not. If not, you should
not delay taking an adequate insurance cover.
At PersonalFN, we believe term insurance policy is the best while
safeguarding your family's financial future and you should never mix
your investment and insurance needs. Apart from life insurance, also remember to take a suitable health insurance policy as medical and hospitalisation bills can sometimes create a big financial crunch and ruin your finances.
- Consult the Expert:
We understand that you might not have the expertise or the time to
review your existing investment portfolio, reduce your debts, work on a
budget, create a contingency reserve, decide on your financial goals and
its amounts, protect your and your family's financial future, and
decide on where and how much to invest. But in such a case, you can
always hire the services of a financial planner,
and while you do the same, be careful in your selection and seek
services from the one who is qualified, unbiased and who would adopt as
much as care and prudence as he would do while managing his own
finances, but taking into account your needs and risk profile. Remember,
investing in the advice of an expert will not be a waste of money and
could put your personal finances on the right track.
We believes that if you follow the above mentioned to-do list rigorously
then it will definitely improve your and your family's financial future
not just this year but also in the years to come. Remember that, the
most important thing about new-year resolutions is not just to make them
but to implement them as well. On that note, we wish you a financially
healthy 2014.
~
Source : personalfn
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