Starting this new year, many of us have committed to take steps toward financial freedom this year. If you wish to keep your finances on track, find out the annual financial to-do list.
To many, managing their finances feels like another full-time job. Though managing one’s finances is something that should be done more often than others, many consider this a once-a-year job. Now that the new year is here, many of us have committed to take steps toward financial freedom this year.
Some of the most important things people focus on are getting out of debt, saving, and investing. Before setting any goal, find out where you stand. Assessing your financial status before you can set any goals is important. This might feel a little stressful, but this way you can set realistic goals for the year. Look through your current debts, savings, and investments where you stand.
With the arrival of new year, here is a list of five financial goals that you should consider doing this year.
- Set goals: Understand what you want to do with your money and how you want your financial future to look like. Life situations and lifestyle will play a big role in influencing these decisions. It’s essential that you know how to make the best use of your resources. Experts suggest one should set goals in three time-frames – short-term, mid-term and long-term. Short-term: Has a time frame of a few months to one year. Mid-term: One to five years. Long-term: Involves plans that are more than five years away. Keep your financial goals specific, realistic and action-oriented.
- Emergency fund: It is imperative to create an emergency fund before you start saving for other goals. Experts suggest that keeping a certain amount at home or in liquid or short-term debt funds prevents from dipping into investments during emergencies.
- Control your credit card: Most people overspend on credit card, which could otherwise be an excellent resource. A credit card should be used as a payment mechanism and not to rotate money. The point to remember while using a credit card is that do not borrow more than what you can pay in a month.
- Get rid of Debt: You might have heard this many times, but you need to get out of all your debts. The entire surplus you have right now should go towards paying off your debts. Making a minimum payment on a credit card loan and rolling it over can be a disaster as interests rates and penalties in such cases are very high.
- The must-haves: Starting to get your finances in track could be overwhelming. The first thing, however, is to build your insurance portfolio.
- Health insurance should be the first priority. Having an appropriate health cover will help you during huge hospital bills. It will also stop you from not dipping into your savings. Experts suggest even with an employer cover, opt for an individual cover. While choosing a plan, consider your and your family’s healthcare needs and the premium you can pay.
- To buy life insurance, start with calculating how much the dependents should receive in case of the untimely death of the bread-earner so that they can live comfortably. Experts suggest, among the many types of schemes firstly opt for a term plan. In exchange for fixed premiums, these plans offer protection for a certain number of years. If the policyholder dies during the policy period, the dependents are paid a certain amount.
- For investing, while there are lots of products to choose from, start with putting some money in a liquid fund. Keeping some money in a liquid fund is better than the money lying idle in a savings bank account. After that you can start with investing a certain amount in equity mutual funds through SIP. SIP minimizes the risk of losses in equity markets, as your investments are staggered, and still help you earn excellent returns. All you need in your portfolio is investment vehicles that have the potential to give returns that are higher than the inflation rate over long periods.