1. I will track money flows
This year, track money movement regularly keep a note of your earnings and expenses. Daily notings, weekly audits and monthly reviews will help you have a clear understanding of what the scenario really is. Don't bank on the feel good' factor and the belief that all is well.
Financial planners reckon that tracking inflows and outflows will not only tell you about what is happening around but be of immense help in planning your future.
The expenditure details will not only help you curtail unnecessary costs but also make you understand your expenditure patterns. This will give you an idea of your future requirements for which you need to prepare now. The earnings analyses will not only make you aware of how much your income is but also make you aware of the composition of earnings and its sustainability in the long run.
2. I will prepare a financial gameplan
You need to chalk out a clear financial plan for yourself. There are ample number of experts available to help you draft your financial goals for the short as well as the long-term.
Seeking expert help works as you get a clear idea of financial goals along with your current status and the gap you need to bridge over a stipulated period of time.
It also helps you carve out strategies that will take you towards your financial goals. There are several banks and financial services companies that could be at your service. Here, sifting through service providers would be of great help. After all, the number of people seeking financial planning or wealth management services is heading northward.
There is a plethora of financial products available in the market that could cater to your financial goals. There are many coming up in 2008 as well. Seeking expert advice therefore would be a crucial.
3. I will ... keep a tab on my debts
You will have to wage a war on your debts. Debts are good if you can use them to create wealth. However, living a leveraged lifestyle on the back of high cost debt is nothing short to sitting on a ticking timebomb. Increasing number of people, especially those who made money recently, have been getting lured into the debt trap. Are you one of them
Here, you could prepare a statement of your loans. The statement should include the amounts, rate of interest, method and time-frame of repayment. You can prioritise the loans you have taken and move from high cost means to low cost ones.
Credit cards are typically the costliest and secured loans the cheapest means of financing among organised resources.
Ensure that business loans and loans raised for business purposes dont get intermingled. The debt not only eats into your current earnings but also mars your plans to fund your retirement plans whether from business or your job. Hence, it makes a lot of sense to pay off debts, even at the cost of investment.
Consider a simple case. Your personal loans cost you anywhere between 14% -17% and your contribution to PPF earns you 8% and a one-year fixed deposit fetches even less than that.
One last point. You should use credit cards wisely so that you don't need to work hard to repay your bills.
4. I will not spend on unnecessary products
Insurance is one thing, which you can easily buy when you dont need it but can't buy when you badly need it. Hence, do spend some money buying life and health insurance. There are home insurance policies that insure not only your house but also the valuables. Most banks also offer loan insurance products on a group platform. Please do check if you have insured yourself at least to the extent of the loans raised by you. This ensures that your family is not burdened in case of an eventuality.
5. I will be diligent
You will have to focus on due diligence. During the year, making money was everybody's business. You just needed to buy stocks to do that. In fact, in the last one month, small and mid cap stocks too have blazed several trails. This, according to experts, characterises euphoric times, a time when you have to be extra vigilant.
In 2008, it would be wise not to just bank on tips but also do some homework before jumping into a trade, even if your broker gives you the go-ahead.
Even Bombay Stock Exchange recently launched a campaign educating investors about the perils in blindly playing the market. Avoid tips based buying henceforth.
6. I will focus on the broad picture
You need to focus on the broad picture and not get swayed by short-term fluctuations.
The volatility in the markets is here to stay and you are going to find out the opportunities hidden in the challenges in the market.
Remain invested in the long-term with a clear focus on fundamentals than anything else. It is not the timing but the time in the market that pays you at the end.
Even while working with a financial planner or a wealth manager, set your sights for the long-term. History is replete with cases where hard earned wealth was tarnished when there was over-reliance on quick gains.
7. I will start succession planning
You will have to get over your laziness and meet your lawyer and chartered accountant or work with a wealth manager to create a succession plan. After all, life is uncertain and you need to take care of your familys as well as your business interests. You must take up this issue on an urgent basis. Work out a succession plan, create trusts and a will indicating how your wealth needs to be distributed. It has been found that this aspect is often ignored by the country's wealthy, triggering family squabbles that are highlighted by the media.
8. I will invest in myself
For the last few years, you have invested a lot in stocks. Some of you may even have invested in real estate and commodities. Now, it's high time you invest in yourself. Sharpen your skills that you already have. It may be formal education or otherwise.
The economy is expected to grow above 8% in the long term. This ensures that you are well positioned to take advantage of the structural changes. After all, it is you who will decide your future and not your money, stocks, bonds, mutual funds and real estate.
9. I will contribute effectively
Distributing your wealth and contributing to the society are honourable intentions. And even here, there is some diligence required.
Be careful when you hand out money to charitable institutions blindly. Ask questions and seek details on how your money is spent. This will not only give you satisfaction but also bring in the much-needed accountability that charitable institutions need to follow.
These are some resolutions you could take. You could choose and pick any that are relevant in your case. The year 2008 and beyond offer a lot of promise to grow your wealth and the team at FE Investor wishes you all the best in the New Year.