A new year means opening of new avenues of opportunities and could also be fraught with new challenges which might dent your finances if you’re not adequately prepared to take them on.
A new year means opening of new avenues of opportunities. However, a new year could also be fraught with new challenges which might dent your finances if you’re not adequately prepared to take them on. You need to tick certain boxes to ensure you’re not just well-prepared to tackle any kind of financial emergency but are also on track to meet your financial goals next year. As such, you’ll be well-advised to check these 20 signs to prove you’re all set to have a financially sound 2020.
Give yourself 1 point for each task you’ve completed.
1. You Have A Monthly Budget
A monthly budget helps increase savings, reduces expenditure, and keeps track of where your money is going. Creating a budget is the first step towards financial stability—and if you have one, well done! You are likely to have a good start to 2020.
2. You Have An Adequate Emergency Fund
An emergency fund is a fixed deposit or a liquid mutual fund or even funds parked in a savings account worth 3-6 times your current monthly income. It could be more, or less, depending on your family’s needs, financial situation, or current liabilities. If you have this fund ready, you’re likely to have no difficulties in 2020 even if you were to have a crisis such as a job loss or any other unplanned emergency expenditure.
3. You’ve Identified Your Financial Goals
The objective of a budget is to help find ways to fund your truly important life goals. If you’ve worked out a budget, you’re likely making allocations towards those goals which could be buying a home or saving for your child’s education or planning for retirement.
4. You’ve Chalked Out Investment Plans to meet your goals
Every financial goal has an appropriate financial plan that optimises returns, time frame, capital safety, liquidity, and tax efficiency. If you’ve worked out these details in your investment plans, you’re on your way to hitting your targets.
5. You Know How To Diversify Your Investments
Never put all your eggs in one basket. You must diversify your investments to get good returns with low risk. If you’ve already spread your investments across deposits, mutual funds, equity, bonds, real estate, gold and other instruments, you’ve diversified your portfolio well.
6. You’ve Stepped Up Your Investments
Wealth creation needs to be accelerated in line with the annual increase in your income. For example, if your monthly income has risen from Rs. 50,000 to Rs. 55,000, your monthly SIP should ideally also increase from Rs. 5000 to Rs. 5500. If you’ve already stepped up or have plans in place to step up your investments for the year, you’re going to get to your financial goals sooner.
7. You’ve Fully Utilized The Tax Benefits At Your Disposal
The Income Tax Act is voluminous and confusing, which is why every person must try to understand the tax deductions available to him. So if you’ve already assessed and planned for your deductions under Sections 80C, 80D, 80E, 24 and other sections relevant to you, you’re going to save taxes in an efficient manner in 2020.
8. Your Life Is Adequately Insured
Any person with financial dependents and financial liabilities must have adequate life cover which can take care of those liabilities as well as provide for the family’s income needs. So if you have a term plan with a sum assured worth 10-20 times your current annual income, you can have peace of mind.
9. You Have Comprehensive Health Insurance
A comprehensive health plan for yourself and your family would keep your finances secure against hospitalisation and critical illnesses. If you’ve bought insurance, you will be able to meet your health emergencies head-on and not have to worry about the financial repercussions of poor health.
10. You’re Working Towards Increasing Your Income In 2020
One of the best ways to meet your financial goals in life is to have multiple streams of income. It’s passé to depend on just one stream. Through smart investments, developing skills, and finding ways to monetise your free time, you have increased your income and thus going to be wealthier in 2020.
11. You’re Regular With Your EMI Payments
You know that missed EMIs and late credit card payments hurt your credit score and can also make it tougher to get fresh lines of credit in the future. Also, missed repayments can lead to an accumulation of debt. Therefore you have wisely automated your loan payments and are never late.
12. You Keep Your Credit Utilisation Ratio Below 30%
You are aware that a high CUR can lower your credit score and therefore always keep your spends to below 30% of your spending limit. You don’t have rolling credit card debt because you understand how expensive credit card debt is, and that is why you’re going to have no difficulty managing your liabilities in 2020.
13. You Know How To Maximise Your Card Benefits
Your debit and credit cards come loaded with cashback, rewards, discounts, loyalty points, and freebies—but you already know that. You plan your spends smartly in a manner that allows you to maximise your reward points (or help boost your savings with cashback) and thus get more bang for your buck on every shopping trip.
14. Your Credit Score Is 750-Plus
Because you’ve wisely managed your debts and have always repaid your dues in a timely manner, your credit score is likely to be over 750. And this is why you can expect to receive some of the best credit card and loan offers in 2020.
15. You’ve Minimised Your Reliance On Cash
India’s gone digital—and so have you. Your wallet is empty for the right reason. You use plastic as well as UPI, ready to be used anytime you want to transact—and with them, you also earn reward points, cashback and discounts that you don’t while using cash.
16. You Have Property & Vehicle Insurance
Your belongings—home and hearth—are adequately insured via a home insurance policy, as are your vehicles which have comprehensive insurance and not the plain-vanilla third party cover. With it, you can have peace of mind during theft, robberies, fire damage, and natural disasters.
17. You’re Aware Of The Inflation Rate
Inflation eats into your investment returns. But you’ve made investment plans, made budgets, and carefully picked the right investment instruments that would help you beat inflation and create wealth.
18. You’ve Started Retirement Planning
Along with all your various financial goals, you are actively thinking about, and planning for, retirement. As a smart investor, you know that retirement isn’t an abstract concept other people need to deal with. You’ve started investing for retirement and have already made progress on this front, which will serve you well in the 2020s.
19. You’re On Top Of Your Accounts
You are aware of the various financial and banking accounts you’ve opened. Your accounts are KYC-compliant; you keep track of your statements and have online access to your accounts. You’ve also have declared nominees to those accounts. And this way, you’re unlikely to face any problems with your account.
20. You Have A Will & Liability-Free Assets For Your Dependents
Life is full of uncertainties. But your family has little to worry about—financially speaking—if something were to happen to you. You have a will that outlines how your assets need to be managed. Not just that, you’ve ensured your dependents will not be burdened by your liabilities.
Of these 20, how many tasks have you already completed? Do share in the comments how you managed to complete them.
(The writer is CEO, BankBazaar.com)