2020 is almost here and it’s time for new resolutions. However, if your finances are the beating heart of your plan, then it’s also time to manage them. Having a solid grip on your finances is the best way of taking advantage of new opportunities and weather storms.
In this post, we discuss 5 essential financial tips to help you enjoy the upcoming holiday shopping season without derailing your financial goals for next year. These tips can help you stay on track by mapping your goals now so you can start off on the right foot and avoid quitting a few weeks into January.
- Establish Your Savings Goals
The first step towards financial planning is establishing saving goals. Define your future personal finance savings goals. Plan the major expenditures such as house purchase, wedding, children’s education, etc. Do you need a down payment for a home?
Make a list of what you are saving for and prioritise them. If you have already started saving, map your progress. See if you can add more and analyse if they are dipping. Re-establish your savings goals and create a plan to stick to them. You must have specific, measurable, realistic and time-bound goals.
2. Take action immediately
Goes without saying – it is critical to begin working towards building retirement and investing savings. If you have specific retirement goals, you may need to increase your savings, investment and let compound interest generate more earnings for you. Certain factors constraint our ability to save for our retirement account. This number can depend on your age at which you begin making contributions and the type of retirement account you have. Doing so can also help you take advantage of tax-saving policies.
Setting aside money on a regular basis can act as a cushion in emergencies such as job losses and allow you to leave your investments alone in case you fall on hard times.
3. Pay Off Credit Card Debt
Excess leveraging can be dangerous. Credit card debts, when on the rise, can become the number one obstacle in your journey towards financial wellness. Look at your balances, see what you can do about reducing your debt burden, review interest rates and strategise a prudent debt management strategy. To decide whether or not a debt must be repaid, consider the opportunity cost. If the present value of money is higher, then you may get more value of money. You could consider taking an instant cash loan from EarlySalary – where you can borrow up to Rs 2 lakhs for as low as Rs 9/day. The instant loan option from EarlySalary certainly works out to be significantly cheaper than the cost of credit card debts.
4. Prepare for Taxes Early
Gathering tax receipts, determining reductions, income proof and tax consultation to evade the tax preparation hustle in March and early April can put you in the position to get an earlier refund. While also giving you the time to discuss any issues with the IRS before they become unreachable in March. You can optimise your tax efficiency by making the most of allowable deductions for contributions to retirement savings before the financial year ends.
5. Invest in a Diversified Portfolio
Don’t keep all your eggs in a single basket. With investment instruments such as equity markets, mutual funds, annuities, real estate, etc., investment diversification has become much easier. If you are consistent and careful with your investments, you will be able to generate a significant savings pool. However, remember that as you near retirement, the weight of equity investment may be changed.
Don’t just follow these financial tips right off the bat. Assess what’s best for you, allocate money in a way that maximizes returns. It is important to not just buy into the conventional wisdom but also take the time to think about your own financial situation. Re-evaluate you financial goals every year and don’t let your financial vigour slip through the cracks.