Draw a budget and follow it: A budget helps in tracking your expenses, bringing about discipline and increasing cash flows. When you create a budget and compare actual expenses vs. targets, you will slowly begin to understand where you are over-spending. Start the New Year by creating an exhaustive budget, including both necessary items as well as discretionary spend. If you plan to incur any big-ticket expenses during the year, this should be prepared for in advance, to help you have funds when you need them.
Reduce debt on your books: High debt means high interest outflow and lower investible surplus. Try to pay off your outstanding credit card bills on time and personal loans, as these are the costliest loans. Part pre-pay your vehicle loans and auto loans to reduce interest cost over the life of the loan. Use your annual bonuses and windfalls for this purpose, as a reduction in tenure of the loan goes a long way in reducing interest outflow. You can also compare home loans in various banks and switch to a bank which offers the best rate, to help you save on interest cost.
Build a contingency fund: It is usually recommended to have atleast 6 months of your expenses as a contingency fund, which will help you in times of emergencies. Start building one if you do not have it in place, keeping in mind liquidity and earning potential of such a fund.
Cut down expenses and save more: This is the most advised, but most difficult personal finance practice to be followed. In this world of high cost of living, it is easier said than done to control expenses. A good idea would be to watch out for impulse spending, as this is what can easily burn a hole in your pocket. Impulse spending refers to spending spontaneously, on items which may not even be necessary, but you buy them simply because you find them attractive. Resolve this New Year to spend less and save more. Higher savings should be translated to higher investments in various avenues depending on your financial goals. You can set a savings goal for the year and track your progress monthly.
Increase funds towards retirement planning: Retirement planning is often not given the importance it deserves, especially by people in the beginning of their career. Use the coming year to maximise your investments towards retirement planning. Inflation and high cost of living require you to allocate maximum funds towards retirement planning.
Organize your paperwork: Getting your paperwork in place for all your documents, investments, banks, demat accounts, credit cards, insurance policies etc is of utmost importance, as these help you in achieving easy financial transactions. Click here to access a checklist of important things to be done to help you get your documentation in place.
Plan your taxes in advance: Tax planning is often done during the last few months of the year, when investment proofs are to be submitted to the employer. This results in choosing investments which may not be very beneficial in the long run. Thus it is always recommended to start planning your tax investments from the beginning of the year. This year, begin your tax planning in April itself, to help you make wise decisions on the investments you choose.
Shop when there are discounts and offers: Shopping during festival seasons when there are good discounts, deals and offers can help you save considerably amount of money. Money saved is money earned. So plan your purchases for the entire year when the year begins. However, remember that discounts and deals should not be the sole reason for you to shop.
The above tips may not result in you getting money overnight, but will slowly and steadily help in building your wealth and improve your financial matters. Happy money management in the New Year.