Happy New Year to you and your loved ones! May this year be filled with health and wealth and bring you great joy and prosperity.
At the beginning of every year, we share with you a list of financial resolutions that you should imbibe and follow. While these resolutions have nothing to do with any specific new year, they are very important pillars on your path to Financial Freedom and thus, are things that we repeat to you every year and multiple times throughout the year as well. For our regular readers, it is a chance to revise and renew your resolutions, for our newer readers, it is an opportunity to start the year on a strong footing.
1) I will have an Emergency Fund and use it only for that purpose
Many make the mistake of investing in equity straight off the bat, without having a safety net. Some make the mistake of using their emergency fund for other things and not replenishing it. Have at least 3-6 months worth of expenses parked in a liquid fund that you don't touch unless in case of an emergency.
2) I will subscribe to a Comprehensive and Adequate Health Insurance Policy
After Covid, we all understand the importance of this, but sometimes we still procrastinate and end up with inadequate coverage or plans with inadequate features. If you have still not taken a health insurance policy for your entire family then please stop procrastinating and take it today! Health truly is Wealth. The cost of healthcare is increasing rapidly. For those living in metros, a comprehensive cover of at least 20 lakhs is absolutely essential.
3) I will acquire a Pure and Adequate Term Insurance Policy
Anyone with dependents MUST have a term plan to safeguard their family in case of an untimely demise. The amount assured for term insurance should equal at least 10-12 times your annual income (plus any on-going loans). The coverage provided by ULIPs and traditional plans is no where close to enough. Get a pure vanilla term insurance plan. Even if you don't have dependents, you should get a term plan as soon as you start earning because you can lock-in cheaper premiums the earlier you start the plan.
4) I will Make a Will
Stop procrastinating and make it today, we are all mortals in the end. Wills ensure that your family does not have problems and squabbles after your demise. They ensure that the loss of losing a loved one is not burdened further with financial turmoil.
5) I will focus on Proper Asset Allocation
Asset Allocation is the single biggest factor that generates portfolio returns in the long term. It allows us to not get carried away by market headlines of panic or greed but truly improve our risk adjusted returns in the long run. Have a chat with us so that we can formulate the proper asset allocation for you and then make sure that you stick to it.
6) I will not try to time the market
It is time in the market and not timing the market that counts and works. Invest with your financial goals in mind and avoid getting swayed with sentiment or media headlines.
7) I will not make knee-jerk investment decisions
Similar to the resolution above, your investment decisions need to be well thought out and planned based on your financial goals. Market movements or any other external factors should not make you panic or make any hasty decisions. Stay away from stock-tips, hyped IPOs and F&O!
8) I will not let money lie idle in my savings bank
Have a plan so that your money is always at work and not wasting away in savings and losing value to inflation. If nothing else, start by investing it in a liquid fund.
9) I will not get carried away by stories
There will always be that 1 person (or 10!) at social gatherings that go on about how their latest real estate investment has doubled or how their favorite stock pick is now 5x (especially after the last 3-4 years)! Realize that - firstly, people only share their wins and not their losses, their overall portfolio might look very different; secondly - sustaining high returns across market cycles for a long term is just not feasible. Have reasonable return expectations and make sure that through financial discipline, even those returns make all your goals come true. And if markets do give us higher returns, it's an icing on the cake.
10) I will go through these resolutions every month
What good is a resolution if it is not adhered to? To ensure that you stick to your resolve, go through these resolutions. This could arguably be the most important resolution on the list as it makes sure that all the others are followed!
What are some of your resolutions for 2025?
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