5 New Year Resolutions for 2023: Finance Edition
We’re looking at another brand new year with new opportunities and experiences. While you may be busy jotting down a new list of resolutions you vow to stick to, there is a whole new aspect of new year's resolutions you MUST NOT miss - managing your finances. While these resolutions can help you manage your finances, they will also bring much-needed financial discipline into your life.
The best thing about inculcating these at the beginning of a new year is that you get a clean slate to manage your finances. Planning personal finance and prioritising saving and investing should be a part of your new year resolution in 2023. And mind you, unlike going to the gym, these are resolutions you can stick to for 365 days if you follow simple tips!
Here are a few new year's resolutions that will bring your finances under your control -
1. Save More
The importance of saving cannot be stressed enough. Saving money should be your most important financial resolution as it will help you sail through difficult times, especially when you may not have a fixed/ stable source of income. You can either open a fixed or a recurring deposit to build an optimum level of savings with you.
You can also save more by increasing your contribution to different retirement funds. You may also enjoy several tax benefits when you increase your contribution to these funds. You can also put your money in some of the high-yield savings accounts to ensure that your money keeps growing or simply, put money in fixed deposits at frequent intervals. Remember – when you save more, you create an opportunity to invest more and grow your wealth over time.
2. Improve Your Credit Score
A decent credit score should be your primary new year's resolution. The resolution becomes even more important if your credit score is below 650. Simple hacks and tips followed throughout the year can help you build a healthy credit score. An important aspect to remember here is to ensure you pay your credit card bills in full on time. You can also set up an auto-pay if you forget the due date to avoid your credit score taking a hit.
Paying off your loans on time is important if you want to maintain or improve your credit score. Your credit score is also impacted by any new credit card you get or a new account that you open. In addition to this, try to keep your credit utilisation ratio under 30% and avoid making too many credit enquiries at the same time.
3. Create a budget and Stick to It
It might seem the most obvious advice, but it can be tricky to create a budget and stick to it. If you create a budget that motivates you to save and invest, you can increase your net worth over time. To create a budget, you must figure out the income you get after all the taxes are deducted, how much money you are spending and investing, and the amount you save at the end of the month.
You must calculate your fixed monthly expenses, like your mortgage, rent, etc., and add them to your budget. You can then have a small portion of your income to meet your variable expenses. You can create an emergency fund that comes in handy if you need additional funds. It would be best if you also tried to predict any big-ticket purchases you will likely make in the next three months.
While creating a budget is important, sticking to it is equally important. You can only stick to the budget if you record your expenses daily. You can maintain an excel sheet or a notebook to note your expenses.
4. Build an Emergency Corpus
Risks are a part of life, and you should try your best to be prepared for such risks. Creating an emergency fund will help you deal with your emergency expenses. The emergency corpus must equal at least 3 to 4 months of your fixed living cost. The fund will help cover financial obligations without liquidating your investments or touching your savings.
5. Create an Investment Plan for the New Year
Is wealth creation on your mind this new year? If yes, having an investment plan is quite important. You must try to spare some funds for investment. To make the most of your money, you should optimize your portfolio. While understanding investments and the market could be challenging, you can create a plan to make the most of all kinds of markets.
Once you invest, you need to monitor them from time to time and make real-time changes to your portfolio. While investing in stock marketing and buying mutual funds is a good strategy, you must also invest in different insurance policies, like life and health insurance, as they safeguard you and your family against any financial externalities.
The Bottom Line
New years is the best time to bring your finances on track. While all the tips above will help bring some financial discipline, you need to realize that you need to take one step at a time. You cannot do everything at once. Start with creating a budget, and everything else will follow. Ensure that you track your progress to keep up with your financial goals throughout the year.
AN Dec 07/22