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Getting in shape, eating healthier, and spending more time with loved ones are common resolutions people make at the beginning of the year. In addition, some people also have a savings plan on their list to create wealth for their future life goals. Sadly, the ongoing pandemic has stripped many people of the wealth they have amassed over time. Some have faced income reductions, putting better financial management and getting a regular income plan on top of their priorities.
However, regrettably, around 80% of people fail to stick to their new year’s resolutions. If achieving financial fitness and improving the way you handle finances feature on your resolutions list, but you have not succeeded so far, this article presents an actionable plan.
Here is a list of some new year financial resolutions you can make to achieve financial stability, along with guidelines on how you can stick to them.
Resolution 1: Set Clear Goals of Financial Management
Want to tour a foreign country? Plan to buy a new house? Want to save for your child’s education? The first step to effective financial management is to identify your goals.
Whether you are creating a savings plan or thinking of investing in the stock market, knowing the ‘why’ helps you chart a clear roadmap. Having a list of financial goals enables you to understand your financial needs. With definite financial goals, you can figure out:
where you need to put your money to get the returns you need to achieve your goal
how much you need to invest
Make sure you set down SMART, i.e., specific, measurable, adjustable, realistic, and time-bound goals. A realistic timeline will enable you to earn, enjoy your money, and save at the same time without financial constraints. In addition, it will further assist you in analyzing your risk tolerance capacity, directing you to investment instruments that suit your needs.
Once you have clarity about your goals of financial management, it is time to manage your income on a day-to-day basis and budget your expenses.
Start by making a note of your income from all sources, fixed expenses like rent, utility bills, and so on.
Next, list out variable expenses such as entertainment.
Finally, tally your savings at the end of each month.
This exercise will give you a fair idea of your spending and where you can cut it down. For instance, you can cut back on the money spent on restaurants, movie theatres, or branded clothes.
After you create a monthly budget, stick to it. You can achieve this by inculcating habits such as carrying cash while shopping, preparing a list of groceries to buy and adhering to it, etc.
Remember to compare the actual expenditure to your budget at the end of the month. There might be some deviation, but it will add to your savings plan in the long run.
Resolution 3: Get Adequate Insurance
Experts repeatedly stress the importance of insurance. Regardless of your age, it is essential to secure your loved ones against unforeseen events that could lead to financial instability.
Safeguard your dependents’ future by purchasing life insurance. First, calculate the coverage amount sufficient for your family. Next, evaluate your family’s lifestyle costs, the number of dependents, and how long they will need financial support. Ideally, the amount should be 10 to 12 times your yearly income.
If you are still in the early stages of your career or don’t have a high budget, term insurance is a viable option. The payout can help meet your loved ones’ living expenses in case of an unfortunate event.
A life insurance plus savings policy is ideal if you want to build wealth. Along with protection, a savings insurance policy with a regular income plan ensures an alternate source of income. Such schemes can help you tide over temporary financial hardships and grow your wealth.
With Tata AIA pay premium online option, you can get insured with a few clicks at any time convenient to you.
Do not forget to get a comprehensive health insurance plan to take care of hefty hospital bills in medical emergencies.
Resolution 4: Start to Invest
This is a piece of advice that you may have received as soon as you began earning. Investing from an early age allows you to enjoy the power of compounding and multiply your wealth. But, if you have not yet started, it is never too late to begin your savings plan.
Once you assess your goals, short-term and long-term, identify investment avenues that fulfil your needs, and understand your risk appetite, you can invest in the capital market. If you are new to this, you can buy a ULIP from a reliable insurance provider. It will help you meet dual objectives – you can invest in market-linked securities and insure your family’s future at the same time. If you wish to mitigate the effect of market fluctuations, you can opt for periodic investments with a Systematic Investment Plan or SIP for long-term investment.
Resolution 5: Create a Contingency Fund
Life is unpredictable. Accidents, health issues, economic crises, and such hard times don’t come with a warning. Therefore, apart from insurance, having some liquidity with an emergency cash reserve can save you on a rainy day.
You must have at least six months’ monthly expenses, including EMIs, as your contingency fund. Create a budget for it and put aside some amount every month towards your emergency nest egg.
It is advisable to invest this money in less volatile products that can be liquidated quickly. Some options include bank deposits, liquid funds, SIPs, or a guaranteed# savings insurance policy. Such a fund prevents you from draining the savings you are building for your primary life goals in times of need.
Financial discipline is the key to becoming financially fit. So, add the resolutions described here to your new year financial resolutions and stick to the plan to accomplish your financial objectives on time.
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