How to set the right financial resolutions in the year 2018?

You need to save money in order to have money, you need to invest money to have a pool of money. It is important to make good amount of money so as to achieve the freedom to do what you really want to do in your life. Since the year has just ended and it’s a celebration time to welcome 2018 and also the apt time for you to set up some realistic financial resolutions.  Let us look at some interesting points to ponder in order to successfully set your financial resolutions:-

Start with the review of your last year’s financial performance: 

First thing you need to do is to introspect and do some self-analysis by asking the below questions:- 

• Did you achieve your financial objectives set during the last year? 
• Did you incur any expenses which were unexpected?
• Did you pay your EMIs and credit card payments in time?
• What is the return you made on your investments; did you surpass your target? 
• Did you have an extra cash lying dud?
• Did you touch your emergency fund, rather did you create one?
• Did you borrow money and for what purpose?  

After this self-analysis, following are some of the financial resolutions you can make for 2018:-
 
Plan & Control your Budget: Budget is one of the most important step for controlling your finances, you need to track your spending habits well. What following a budget does to you is it makes very easy for you to change your financial patterns and habits and help you understand things which you have to change.  

Improve your Credit rating: Having a good credit rating is always important and a sign of a healthy financial life. Keep checking your credit score to constantly improve the same, in case its needed.

Plan to reduce your debt: Nobody wants a loan on their head, especially salaried class people who does everything to pay off their home loans on every raise or money they get. Ideally don’t take home loans to be a bad debt as without that many wouldn’t have bought their houses/flats. But yes, do a proper cost benefit analysis before paying out your home loans as now a day’s interest rate is around 8.35%, so as long as you can make more returns than this via alternate investments options like mutual funds etc. then you can plan accordingly. But yes, if you have a loan say personal or a car loan at a much higher rate, then it makes every sense to pay off that loan asap.

Emergency/Contingency Fund: If you don’t have a fund set aside to meet your emergencies, then make one in the new financial year! And If you have already got an emergency fund then aim to increase it. 

Pay your EMIs on time: The last thing you want in this new year is to pay a penalty for any of your late payments either for tax, EMIs or a credit card payment. Make sure to make a due date diary and set a reminder for all your regular planned expenses or payments on your phone. The best way is to create auto debits, ECS towards any planned expenses. 

Make charity a part of your financial planning: Most of us wants to give back to our society and many times we plan to do this but many times takes a back sit due to other priorities. If you also want to contribute then make the joy of giving a part of your financial planning so as you don’t have to wait to do something good and meaningful. 

Create second source of income: This new year, focus on creating an additional source of income which could possibly come from either following a hobby or any skill which helps you generate an additional income. 

Plan well because the real and any permanent change always comes from inside rather than any external source, it has to be form within so focus on your internal thoughts and start the new year with a bang, Happy Financial Year.

Rishabh Parakh is a Chartered Accountant and Chief Gardener of Money Plant Consultancy, one of the fastest Tax & Financial Service Provider Company. He can be reached at [email protected]