When the year draws to an end and you are sitting at the cusp of a New Year, it is customary to ruminate over the year gone by and make resolutions for the year ahead. In general, most of our resolutions are tethered to health, fitness and completing projects. As we peek into 2020, let’s make a resolution to become financially secure. To ensure that you not only stick by this resolution but also make it a successful one, all you need to do is follow a few simple tenets.
Make a monthly budget NOW: it is easy to lose track of the money you earn if you do not create a monthly budget. At the end of the month, many of us are often left wondering, “where did the money go?”. A monthly budget will help you keep track of your earnings and expenses, and ensure that you spend your money judiciously.
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Start saving NOW: once you have your monthly budget in place, the next step is to ensure that you are saving some money every month. Never spend more than you can afford to else you will have nothing left to spend. Chalk out your monthly expenses and then divide them into essentials and luxuries. Try to cut down or completely do away with luxuries in order to save money.
List out your short-term and long-term goals NOW: now that you have some money saved from your earnings, what do you do with it? First thing, sit down and list your short-term and long-term goals. Basically, list down the future reasons for saving money. This could range from something as simple as taking a foreign vacation the next year to creating a sizeable retirement corpus 40 years hence. Just ensure that your goals are clear and measurable.
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Create an investment plan NOW: meet a financial planner to determine your risk profile. Basically, the investment portfolio that you create will depend on three main factors. These include: i) your return requirement, ii) your risk profile and iii) your investment time horizon. Create a diversified portfolio that invests in a mix of debt and equity and is spread across tenures.
Start an equity SIP NOW: a systematic investment plan is an investment vehicle that lets you invest a certain sum of money on a periodic basis in an asset of your choice. An equity SIP is a great vehicle for generating long term wealth as it lets you take exposure to equities in a simple and systematic manner so that you can benefit from the power of compounding and rupee cost averaging.
Whether it is this year, the next year or the year after that, understand that your financial destiny is in your hands. It is time to take control.
