New year celebrations are incomplete without setting new resolutions for the coming year. We make many, and we break many. You took quite a few resolutions over the years, from going on that solo trip to waking up early every day. However, none worked out. You had the motivation but not the proper guidance or strategy.
But don’t worry! Your savings won’t suffer from the same fate as that gym membership you took last year. Make some financial resolutions this year and see them through to secure your future. Let us help you in your journey to making the right vows and holding up those promises. Here are five resolutions you can make in 2023 and start the year with a systematic financial plan.
Life is a race, and accidents are bound to happen. We never know when an emergency could strike. Stay monetarily prepared against sudden incidents with an emergency fund. A cash reserve especially set aside for unforeseen costs or financial emergencies, is known as an emergency fund. Car repairs, home repairs, medical expenses, and lost wages are a few ways where these funds are utilised. This should take care of necessities and ideally cover six months’ worth of expenses. Ascertain that these funds are accessible in a savings bank account, and that your spouse/dependents have access to it as well. Make a resolution and opt for a fixed deposit to create your emergency fund. An FD will be a stable and secure contribution to your emergency fund.
Every year you feel the need to do something to save up on your taxes, but you fail. Why is this? Have you wholly utilised 80C and other sections of the IT Act? You invest in tax-saving instruments towards the closing of the financial year. Invest in tax-saving Fixed Deposits (FDs) for safe and stable returns while saving on taxes. You can save on taxes while maximising profits by making monthly investments in Equity-Linked Savings Schemes (ELSS) and Public Provident Fund (PPPF). These will lighten your financial load come year’s end and instil discipline in you. Have you considered your house rent and monthly loan instalments? All of these can also get you a tax deduction. So go ahead and commit to utilising the sections under the IT Act better to get reductions and save on taxes this year.
Hitting the gym is not the only way to secure your health. Some good financial decisions can also immensely benefit you if your health worsens. Good insurance is essential to safeguard yourself against increasing hospitalisation and medication costs. When getting the insurance, the policyholder must consider every family member’s physical and mental health and look for a plan that caters to all their needs. The sooner you get a health insurance, the better it is. This is because the younger you are, the cheaper your plan can be. So, take a vow to get a health insurance for you and your family as soon as possible!
Having life insurance is also important to financially secure your loved ones in your absence. These policies protect your future and help you save money in the present. Adequate life insurance can be calculated based on yearly expenditure and after considering possible inflation. Your term insurance should be enough to maintain your current lifestyle and can be shared with other earning members of your family. These can be claimed as tax deductibles under Sections 80C and 80D of the Income Tax (IT) Act 1961. Accordingly, your taxable income reduces and inevitably leads to a fall in the amount you are liable to pay as taxes.
It’s better to pay off your debts as quickly as possible. The longer you are in debt, the more interest you pay. Due to this, you are left with less money for your other expenses. Set a budget for how much you can contribute each month to pay off your debt and stick to it.
If you’re anticipating a raise or year-end bonus, think about paying down any balances with high-interest rates with the extra money. Then, consider combining any outstanding debt to replace the interest rates on multiple loans or credit cards with a cheaper rate on a single loan. If credit cards are not used correctly, they can be dangerous. Always pay off the entire balance on your credit card each month to avoid paying interest on top of what you already spent! By bringing down the number of debts, your financial life can get simpler, and your financial stress can reduce. Make a resolution this year to resolve as many of your debts as you can!
People with a score of 750 or higher are offered the most favourable credit terms. One can build up their credit score by paying EMIs, credit card bills, and other loans before the due date. A lower score results in higher interest rates and, occasionally, loan denials. Hence ensure to check on your credit score regularly and make efforts to maintain a good rating.
An effective way to do this is to avoid part payments and to pay your bill on time using an autopay feature. This will also help you stay on track with your monthly expenses. It would be best to keep an eye on the number of accounts you open and not spend over 30% of your credit card limit. Even paying off your existing loans and debts is an effective way to start recovering your score. These tips will help you maintain a good credit score in case of emergency or otherwise, you can get a loan easily at great interest rates. This new year swear to maintain on your credit score.
Now that you have made your vows, here are some tips to ensure you keep them!
One of the biggest challenges we face when trying to save money is budgeting. Handling your finances can be tricky and depends on your necessities and requirements. However, you can start by trying the 50/30/20 budget rule. This rule was first given by the current US Senator Elizabeth Warren in her 2005 book, ‘All Your Worth. The Ultimate Lifetime Money Plan.’ According to this, use 50% of your income on necessities, 30% on your wants and desires, and put away the remaining 20% in savings and investments. Plan your month according to this and follow through with your new resolutions effortlessly.
We are all tempted to go on a shopping spree. We all enjoy good retail therapy. But we need to consider the impact every purchase can have on your funds and savings. It is alright to indulge in your desires and wants, but overindulgence can seriously hamper your finances. An easy way to curb expenses is to wait 24 hours before purchasing something. Think over and if the next day you still think you want it, go ahead, and buy it. This will stop you from impulsive purchases and save a ton of money, helping you get one step closer to your monetary goals.
Checking your bank statements, credit card statements, and other financial reports is an important step in keeping track of your money. This small effort can go a long way for you. It can help you realise if you are making any unnecessary expense or are behind on any repayments. Checking your statements regularly keeps you aligned with your finances and assists you in making any future monetary decisions.
Stay focused! That is the key to following through with any resolution, physical, mental, or financial! The new year is fast-approaching; which of the above resolutions are you taking this year? See them through with the tips above so that your financial goals aren’t lying around in some stuffed corner along with that long-lost gym membership.
If investments are a part of your list of resolutions this year, get onto Bajaj Markets! Here, you can choose from a wide range of investment plans, including long-term, short-term, and tax-saving options like Fixed Deposits and Mutual Funds. Go check them out now!