Make financial resolutions for 2020 by all means but set small, realistic financial goals in order to be able to achieve them
A new year is always the epitome of hope, new promises and a reflection on last year’s decisions and resolutions. Did you make any financial resolution in January 2019? Were you able to keep them or were they just washouts? Whatever position you are in, today is a good time to assess your financial tally for the last year and look for ways to improve it. According to research in the Journal of Clinical Psychology, only eight per cent of the people who make New Year resolutions achieve them. This New Year, which is also the beginning of a new decade, gives us another opportunity to make some financial resolutions and be among the eight per cent achievers of the world. Here are some New Year resolutions that are not too difficult to keep and might help improve your economic outlook.
Determine your net worth: If you have not done it already, the year ahead is a good time to assess your net worth, which can give a clear idea about where you currently stand in terms of assets and liabilities. It will also give you an idea of how to improve your financial standing by spending less, reducing liabilities and improving savings. So, this year, begin by recalculating your net worth, keep a close watch on your progress towards achieving financial goals and correct any past mistakes.
Out of sight, out of mind: Having funds in your account can lead to temptation as mostly our expenses increase to meet the account balance. To save money, it is very important to earmark some of the surplus funds and transfer them into a separate account that is not easily accessible, making it less tempting to spend the cash that you have managed to save.
Bring down your debt: Uncontrolled debt can lead to financial distress in case you have difficulties in paying regular interests. This situation can easily lead to bankruptcy or insolvency. This year contemplate on your strategy to pay personal or home loans. Once in awhile, plan for an extra payment towards your home loan.
Reduce your credit card outstanding: In case you have an outstanding on your credit card, the beginning of the year is a good time to calculate how much you can afford to pay off realistically during the ensuing months. Try not to charge additional purchases on those cards while you’re trying to pay down what you owe. If you have high-interest credit card balances it would be more beneficial to pay off those high-interest debts than to add to your savings.
Examine your credit report: It is important to maintain your CIBIL score so that your credit record is impeccable. If your score is less, take steps to repair any negative aspects. A poor credit report could increase the interest rates on any future loans that could eat into your potential savings.
Diversify your portfolio: Diversification is an important strategy to insulate your investments against market volatility and rebalance your portfolio to include several asset classes. This strategy will increase the variety in your portfolio.
Change, if you have outgrown your investments: The type of portfolio that you build and the type of investment avenues where you put in your money will change with time, age and the phase of your life. A young, unmarried investor’s portfolio would be much different from that of a newly-married investor or an investor with grown-up children. So whatever your phase of life is, check if your investments till meet your financial goals.
Spend sufficient time in portfolio review: Spending enough time to review your investments is a good strategy to overcome any sudden changes. Review investments at least once a quarter and never leave investments on autopilot.
Look at the big picture: Do not get involved in micromanaging your investments and day-to-day movements of the stock markets. Always be focussed on the long term as short-term ups and downs get smoothened over time. Don’t panic and churn your investments by following a herd mentality. Have patience and give time to your investments to work and generate returns for you. Stay committed to your existing strategy, with a touch of flexibility, to be able to adjust according to changing market conditions.
Get Organised: It is important to understand whether you are impulsive or methodical in your investment style. Are your investments sporadic or do you follow a regular pattern? If you find that your organisational skills are lacking, do something about it. You can set up regular investing, like a systematic investment plan; or you can set reminders in your calendar each month or a few times a year to take a look at your account. The bottom line is that to be able to stick to your financial resolutions this year to accomplish great financial health in the future, you must set achievable, realistic financial goals. Take this day to chart out simple financial resolutions and maintain a checklist to keep track of how you are doing throughout the year so that you can make any necessary modifications. Through careful and concerted steps, let’s resolve to improve our financial health in 2020.
(Writer: Hima Bindu Kota; Courtesy: The Pioneer)