scorecardresearch8 important personal finance resolutions to manage your money better in 2023

8 important personal finance resolutions to manage your money better in 2023

Updated: 28 Dec 2022, 08:18 AM IST
TL;DR.
The new year signifies a new beginning. A new beginning must include personal finance resolutions too.
Planning your finances in 2023

Planning your finances in 2023

For the stoics, January 1 is just another day of their lives. Ask optimists and you will realise how many treat this day as a new beginning in their lives. Some postpone everything good to this new day in their lives. When it comes to money matters, many allocate their resources to affirm their personal finance resolutions during the new year. Some of them are:

Buy insurance before others 

We talk so much about investing and growing our money that most of us forget the need to secure our loved ones. Protecting the interest of our dependents with adequate life insurance should be a priority. You must start with a life insurance plan that will meet the financial needs of your family in your absence due to a sudden demise. You can then gradually move on to buying a health insurance plan to pay off medical expenses considering the rising costs of hospitalization and subsequent medical treatment. 

Build an emergency fund

An emergency can come knocking at your door at any time. Do you have money to tackle an unforeseen situation? What if all your money is tied up in illiquid investments? It takes four days to avail of the maturity amount on the redemption of a mutual fund. It may take an hour or so to withdraw money from fixed or recurring deposits on maturity, thus, highlighting the need to have enough bank deposits to meet expenses in emergencies. This calls for the need to have an emergency fund in place that contains funds equivalent to six to 12 months’ worth of expenses.

Create a future income source

You will not remain young and healthy forever nor will have the zest to continue working all your life. To ensure adequate finances to meet your post-retirement expenses, you must either opt for a pension plan to create a fixed income source in the future or invest in opportunities to earn returns that not only beat the inflation but also help accumulate the much-needed corpus. Alternatively, you may also invest in the National Pension Scheme (NPS) wherein your money is invested as per your choice of fund scheme and fund manager. 

List your financial goals first 

Many people talk of investments without realizing why they are investing in the first place. Before you invest, you must assess how much money you are looking for and in what time horizon. This will help you decide the kinds of investments you must make along with your investment tenure. For example, if you are young and have a large investment horizon, you may stick to putting money in index funds and large-cap funds. If you are looking to benefit from the volatility in both mid and small-cap funds, you may as well put your money in flexi-cap funds. Alternatively, you may consider allocating a bit of your money to gold and real estate. 

However, before deciding your investments, decide your financial goals. Then divide your goals into short-term and long-term financial goals and the purpose for which you want to earn that amount. It is only then you will have clarity regarding the choice of investments you must opt for.

Don’t take uninformed decisions 

So many people jump into trading hoping to earn some extra money from the market without adequate knowledge. Add to it the unsolicited advice on social media handles. Many have lost their lifetime earnings by paying heed to them. Do not decide to trade unless you are aware of how to evaluate stocks based on their fundamentals. It is important to be aware of regular policy changes and market factors before deciding which stock to buy, hold or sell. Options trading is another point where people lose more and gain less. Many people who have been into options buying and selling for more than a year often complain about how their profits hardly exceeded their fixed deposit returns. So, learn before you trade.

Do not stop your SIPs

It is an inherent nature of the market to be volatile. However, that must not stop you from continuing to invest in mutual funds regularly through systematic investment plans (SIPs). While it is okay to wait for a big dip so that you may invest in a lump sum, you must not pause or stop your regular investments based of market movements. While there is a common tendency to be inclined toward dip investments, continuing your SIPs will ensure that your mutual fund investment returns remain in tune with market returns.

Assess your goals frequently

You do not set your financial goals and forget them for the rest 15-20 years of your life. You must revisit your goals regularly. This is also important as this will help you analyse investments beyond returns in a goal-based manner. Also, important life events like children’s higher education, marriage, buying your own house, etc. necessitate you to revisit your goals so that you may alter your investments accordingly.

Seek professional advice

Money management is not only a skill, it is an essential subject which you must be well versed with. Without knowing how to handle your finances, you cannot decide how to use your money to improve your future. A solid financial foundation is important to building and securing your future, which is why you must take professional advice.

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These are investments one can make to beat inflation.
First Published: 28 Dec 2022, 08:18 AM IST