One more year has ended. Once again the time has come to do some retrospection, come up with new resolutions and decide onto work for a better future, better than last year. Many resolutions come from the experience you have had last year. You may resolve to start working out to lose weight , start doing some meditation to de-stress, may resolve to leave smoking/drinking , spend more time with your family and friends….or whatever you think is good for the improvement of your life. I will not interfere in your resolution directly but if there’s some space for your financial life too which I believe should and you resolve to take a step to improve the same then I will help you in fine tuning your resolutions relating to your financials.There’s always a need of fine tuning the things when we are not receiving the results as expected or as required. Fine tuning results in smooth flow of programmes. As the radio and musical instruments need fine tuning for catching the proper frequency, the same way our financial life requires fine tuning when we find that there are some things which are creating hindrances in the whole plan and will lead to some disturbance in the achievement of the goals. And what’s better than the New Year day to relook at our current finances so that we can make some modifications where ever required for our better future.
1. Fine tune your Budget
The whole idea of doing budgeting is to keep our financial house in order. It helps us in managing the cash flows so we can generate enough surpluses which we can invest for our better future. Now if in last year you ever found yourself in a fix to spend on some important things or making some important expense or ever thought of discontinuing or withdrawing your savings to pay your other important need, ever thought of rolling over the credit card balance… then this is high time to relook at your budget and fine tune the same so you should not face such situation again. Find out what expenses you have underestimated or you are overspending on. While doing monthly budget I have seen many people forgot to take into account the annual and unseen expenses like expenses on festivals, expenses on some guest visit or some relative’s marriage , expenses on birthdays, tax payments etc. It’s advisable to take such annual expenses into account and make provisions in your monthly budget. But be sure that this may lead you to cut short your discretionary expenses again. Also it’s better to have the miscellaneous expenses portion to be 5-10% of your estimated expenses.
2. Fine tune your Insurance policies
Take out the file of your insurance policy documents and find out there status again. You would definitely find some of the policies which you are continuing just for the reason of avoiding to book loss on it. I think this is not the right approach and rather than looking it from profit/loss angle, just find out their role in your financial life. Are they helping you in any way in achieving your goals? Are they providing you with enough Sums assured? If not then you should surrender/paid up those immediately. May be fine tuning your insurance policies will only give your budget a positive look. (Review your insurance portfolio)
3. Fine tune your Priority list
Take a look at your Goals again and fine tune the priority list if at all is required. In the last one year you may have read many articles, faced many situations which has changed your viewpoint on some of your goals. You may like to prioritize your retirement planning to your children’s education/marriage; you may want to settle down for a small car rather than SUV and things like that. Fine tuning your Priority list will help you in further modifications in your savings and investments.
4. Fine tune your savings & Investment
I relate the word savings with near term goals and Investments to long term goal. Equity has performed well in last one year and same way due to high interest rates debt products has also given good returns. So now is the time to rebalance the asset allocation. You should not make mistake of thinking that everything is looking good now and stock market will keep moving like this only. Actually this is what many business dailies are pointing out. But one should work with a process approach. You may decide to change your savings instrument like FDs into FMPs or other open ended debt products. The change in goals priority list may also need you to make some changes in the investment pattern. (Read : How to select debt funds)
5. Fine tune your tax saving strategy
Those who are still not doing the tax planning activity in April, find themselves in cash crunch in Jan-Feb-March every year. This is because the employer will deduct complete tax in these months and also they do maximum savings in these months only. So better be planned and this year resolve to plan your tax strategy in April only. This will also help in keeping your budget allocations intact. (Read : Tax saving Tips)
6. Fine tune your Estate planning
If there’s any addition of asset or liability or Changes in your financial/family profile than do relook at your estate planning once again and make the necessary changes in the WILL accordingly (Read : Role of WILL). Do proper nominations in your bank accounts, insurance policies, Mutual fund and other financial instrument for comfortable distribution as and when required.
The whole purpose of financial planning is to make the financial life comfortable. This new year resolve to spend more time with your finances. One or 2 days every month would suffice. The more you spend time with her the more you would be able to understand her problems also the more you will be able to share her happiness. Treat your finances as your close friend and help her grow with proper management as its growth will lead to your growth also. Respect your Money