7 New Year Resolutions that will make you financially healthy in 2022
As we prepare to welcome the new year, it is quite clear for us to see; what goals have we achieved in the past year and what all goals have we missed upon, especially our financial goals. New Year Resolutions have always been a sensational and encouraging method to not only plan the new goals for the upcoming year but also to initiate the work needed to achieve them.
So here we are; to discuss some key resolutions that can make you and your family financially secure in the upcoming new year 2022.
#1 Evaluate your Financial Position
To commence with, it is highly recommended that an individual should evaluate his/her financial position by checking on the list of available resources and performing a basic ratio analysis like net worth, saving ratios, loan to assets ratio, solvency ratio, etc.
This assessment will not only help you to assess your as-is financial position but will also be of great use for making decisions that can define your financial health in the future.
#2 Prepare & Monitor a financial budget
Every individual should make a financial budget for him/her and his/her family. A simple step to do this is to enlist all your regular major expenses under broad categories like food, accommodation, travel, medical, education, etc. Now, you can sub-categorize these expenses as ‘necessary’ or ‘optional’.
This will help you to prioritize your expenses and always ensure that your spendings are limited to the amount left after excluding the savings amount from the total income.
#3 Build an Emergency Fund
In these COVID pandemic times, the need of having an emergency fund has been realized more than ever before. An Emergency fund creates a financial cushion that can keep an individual financially secure without having to depend on loans or advances. Every individual should create an emergency fund that can be used in case of an unforeseen loss of a job or any medical emergency.
Further, the emergency fund should always be easily accessible to your family so that even they can use it when or if you are not present.
#4 Strive to invest 30% of income
The gross savings rate in India is around 30%, while the average annual per capita income is only Rupees 1.35 lakh for the year 2020. So, on average, each individual saves less than half a lakh per annum. To be financially secure, every earning member of the family should try to save a minimum of 30 percent of his/her income, if not more.
#5 Make Monthly Tax Saving Investments
Generally, it has been seen that people make all tax-saving investments only when they are close to the end of a financial year. All these investments, be it investing in Public Provident Fund (PPF) or Equity Linked Saving Schemes (ELSS), or LIC Term Insurances, can be done monthly instead of on an annual basis. This practice of investing monthly would maximize your returns(based on the power of compounding as well as averaging the investment amount).
#6 Maintain a credit score of 750
I hope all of us do realize the importance of having a Credit score of 750 or more to get the best credit terms from banks and other financial institutions. An individual can improve his/her credit score by paying Credit card bills, loan installments, etc. on time.
A poor credit score will not only result in higher interest rates on loans but can also result in denial of loans from banks or other financial institutions in the hour of need.
#7 Focus on physical & mental health, given its strong connection to financial health
Apart from taking care of your financial health, it is equally important to monitor and improve your physical and mental health, by doing regular exercises or playing some sports or by developing a healthy hobby.
Good health will lead to less expenditure on your medical bills and the amount so saved can be used to improve your financial health.
As we enter into the new year, saving more, spending less, and paying down debt should be our top priorities to improve your financial health. While, there are several ways to achieve our financial goals, it is very important to always consider your circumstances before making any decision. This will assist you to achieve goals both in the short run and in the long run.