A new calendar year is upon us. Come to think of it, 12 months is a long time. If used smartly, this time is enough to create an impact. If frittered away, these 12 months are a missed opportunity. In the world of finance, money will remain the king in 2018, 2019, 2020…so on and so forth.
Money is a strange thing. If you have it, you want more. If you don’t have it, you still want it. At our individual level, money is a means to an end. Money could mean peaceful retirement for a couple in their 60s. For the new father and mother, money is what would drive their child’s higher education 20 years later. Thus, it is very important to know what you want from money.
Here are six financial planning tips for 2019.
You can not have a shot at wealth if you spend 90% of your income. In 2019, spend less. Try to stick to a budget. Anticipate large expenses and prepare. Calculate how much you spent in 2018 and aim to spend less. Many people derive pleasure from spending. The world around you is built to make you part with your money. Before you spend, ask yourself—Do I really need it?
If you spend less, saving more is a corollary. However, not everybody who spends less usually saves more. This is because the spending may be immediately controlled, but it occurs at a delayed stage. That is dangerous and spoils the entire plan. Aim to save at least 40% of your annual income. Study your savings pattern and aim to increase it. Nobody became poor by saving more. But those who do not save are likely to face the ignominy of poverty.
Investing does not mean keeping money in your savings bank account. That is not investing. Investing has to be for a purpose and it should give you better returns than inflation. Any so-called investment where your returns are lower than inflation is a way to lose money slowly. There are tons of opportunities out there to invest. Carefully take your investible surplus and start saving in avenues that would generate an inflation and tax adjusted return.
The years 2017 and 2018 had seen the craze over bitcoins. Many did not even understand what a cryptocurrency is but still went ahead and put money. Then, the value of bitcoins tanked. People lost money on mindless bets. No matter how solid the ‘tip’ is and no matter what they say, avoid bets. If winning is a matter of chance, it is better to keep your money with yourself.
Inflation is relentless. Goods and services today cost more than what they did a year back. The same will be true for 2019, 2020, 2021…you get the idea. The only way to counter price rise is to earn more. Relying on salary hikes will not work. Share in family property too is a one-time windfall. That is why you should cultivate a second source of income. Spend your weekends in trying out a second source of income. This new year you must explore a second source of money generation.
The new year is already being billed as the year of the general election. Already financial pundits and experts are talking about how elections will make markets volatile. There is uncertainty about the political outcome. Do not try to invest or do anything with your money in view of the 2019 Lok Sabha election. Elections do not really affect our investments if you look at a one- or two-year time period.
(The writer is founder and CEO, Right Horizons)