It is time to get rid of some of the old habits that have been dragging us down, and inculcate the new ones that can do us good not just for the next year but in the long run too.
The holiday season is crawling in and there’s merriment in the air. However, amidst all the fun and frolic, let’s not forget to set somethings right before the year ends. A new beginning always brings with it the energy and freshness to start new things and replace the old ones. Money habits are no different. So, why don’t we bask in that spirit and get rid of some of the old habits that have been dragging us down, and inculcate the new ones that can do us good not just for the next year but in the long run. Let’s look at some must-have money habits to inculcate for a secure and prosperous future.
Sticking to your budget
You know what they say, it’s not the amount of money you earn that makes you rich, it’s what you save. Similarly, financial distress can fall upon anyone who is not disciplined with money. So, how do we ensure we are saving enough and not spending beyond our means? Create a budget monthly/annually to allocate funds under different heads and stick to it. Assess your expenses to understand where you can cut back. And try to maintain a ratio of 70:30 in allocating funds for expenditure and savings. Lock in your savings at the beginning of the month so you don’t compromise on it.
Clearing off loans in time
Loans are financial instruments that can increase your purchasing power at a time when you may not have the affordability for certain goals and aspirations. However, loans are best taken care of, when repaid in time. It doesn’t just relive you from the interest burden but also preserves your credit score, thus increasing your potential to take loans in the future. Your credit repayment capability is assessed basis your credit history and timeliness in paying off loans. If you are not punctual with your loan repayments, inculcate the habit of paying your EMIs in time. Pre-pay or pre-close your loans whenever you get surplus money.
Investing in a disciplined manner
Investment is not a one-time event. Regular investments help you to average out the market volatility and earn a good ROI. Also when you invest in a regular basis, you can increase your contribution with time, basis the change in your income level, risk appetite, and return expectation. Mutual fund SIPs and recurring deposits are investment instruments that allow you to contribute on a monthly basis and you can start with a very small fund size.
Smart tax planning
Tax management is an essential part of financial planning. If you always wait till the last minute to indulge in tax planning, change that old habit and think of investing in tax-effective assets through the year instead of Jan-Feb-Mar. This will give you the time to research and find the right products, saving you the last-minute rush next financial year.
Set a financial goal
Instead of saving without any particular goal in mind, have a wish list in the horizon. Once you have goals marked against your calendar, you will know exactly how much you will need by what time. This is going to help you choose your investment assets and attain your goals in a timely fashion. Plus, it is always more motivating to work towards something when you know the outcome.
(The writer is CEO, BankBazaar.com)