As 2022 ends, you might consider organising and planning for a better 2023. While it is normal for a lot of us to focus on our careers and health with renewed vigour, it is equally important to have a good look at your finances so that you can have a better year when it comes to your finances.
Here are some simple actions that will help you get ahead and give you peace of mind when dealing with money issues.
Look back at your financial history
If you want to be prepared for the year ahead, it's good to look back at your financial history. You might want to look at your bank statements and credit card bills. Compare the amount of money that comes in each month with what goes out each month. If there are discrepancies, figure out why they're happening and ask yourself if these differences are likely to persist into next year.
If you think you overspend and want to cut back on your expenses, you can inspect your spending habits by reviewing last year's credit card statement. If you use UPI to pay for your goods and services, you can also look at bank statements. This exercise might help you to identify and take care of your problem areas.
Make a budget
This might be a good time to make a budget if you don't have a budget or if the current budget needs to be fixed.
To make a budget, you must first know where you stand in terms of income, expenses and savings. This gives you an idea of where the money flows and whether any changes need to be made moving forward into this financial year.
Next, create a list of your monthly expenses so that it's easier for you to see where everything fits into your budgeted spending plan.
You can check your current spending under the various heads and make your budget in such a way that all areas of your finances including saving and investments, are optimised.
Create an emergency fund
Having an adequate emergency fund is very important for everyone. Life can throw a curveball at any time. While we don't have control over such circumstances, it is on our hands to stay financially prepared for emergencies.
Typically, it is wise to park at least three to six months' expenses in an emergency fund. However, this amount will vary from person to person. An individual who works in a risky sector might want to park more than six months of expenses in an emergency fund. On the other hand, someone with no financial obligations might be okay with parking for three months of expenses.
A bank account or savings account, fixed deposit, or liquid fund can be ideal options to park your emergency fund.
If you are just starting off, you can open a different savings account to save money for your emergencies. You can also set up automatic transfers into this account every month, so it builds up over time.
Start saving for your retirement
When you're young, and in your 30s, it's easy to think that retirement is far off. But the truth is that you'll only get there if you start saving now. And even if you start early, keeping up with your savings is still essential.
Saving for retirement as early as possible will help you take advantage of the power of compounding. It is because the earlier you start investing, the more time your money gets to earn returns on the returns that you have made earlier. So, even if you start later and invest more money, you might still end up with less corpus than someone who stayed invested more for a higher duration.
Plan for next year's vacation
Planning for next year's vacation can help you save money and get the most out of your trip. You can book early or use a travel agent or package deal that includes accommodations, activities, and transportation.
Know your financial goals
Do you have financial goals? Financial goals help us to focus on our savings and investment. However, it is essential to have realistic and achievable financial goals.
And once you figure out your financial goals, you can create a plan that is aligned with the investment horizon and your risk tolerance. Different savings and investment options can help you plan for your financial goals.
You can make changes today to improve your life for the next year and beyond
Make a list of things you want to do before the end of the year, starting with the most important ones. Then prioritise them based on what is most important to you.
● Create an emergency fund so that you don't have a hard time during an emergency.
● Get rid of any debt that isn't necessary for living expenses. This could be anything from student loans to car loans.
These are just some things you can do to bring your finances in order. You will be a better judge of your personal financial conditions. So, go ahead and make plans as per your situation for a better 2023.
Padmaja Choudhury is a freelance financial content writer. With around six years of total experience, mutual funds and personal finance are her focus areas.