As the next year is around the corner, people are busy planning celebrations for the new year, and others are busy forming resolutions to bring about a change in habits, or to achieve their new and old personal goals. Last year has been an eventful year for most. Whether it has been eventful in a good way or a bad one, 2020 has definitely brought massive shifts in financial aspirations, realities, and performance of the economy in general.
However, optimism speaks of another story – the global economy recovered relatively fast from the clutches of the pandemic. As the next year approaches, this is an excellent opportunity to realign your financial goals, bring about healthy financial habits, and a change in your outlook towards finances. That’s why, here are some financial resolutions that you can take up in this coming year.
Find economical alternatives: In 2020, almost everyone stayed indoors, and as a result, had a gargantuan amount of time on their hand to reflect on money matters. In the process, new ways of doing things gave people insights into their spending habits too. Are you a foodie who loves to dine out? Notice how much you ended up saving this year from dine-out expenses because you had to stay indoors.
Here is what you should take away from this: finding new economical alternatives to old habits, wants and small pleasures in your life can go a long way towards retaining the money you earn in your hands. This is not to say that you should give up on your dine-out weekends – instead, try to recreate a similar experience with your friends and family at home. The upside? Greater your savings, the faster you will reach your bigger financial goals, no matter what they are.
Grow your emergency fund: 2020 was a rough patch for many – and even those who did well in retrospect were left re-evaluating as to what their emergency funds should cover. Your emergency funds form the baseline of your financial stability – should they cover your current expenses for two months, or two six? Should you allocate a separate emergency fund for medical needs? As uncertainty draws near, your emergency fund can not only keep you covered, but also work as the guiding light for your next stepping stone. Redefine your expectations from your emergency fund, and save accordingly to build and maintain a sizable amount.
Make SMART financial goals: In other words, goals that are specific, measurable, achievable, relevant, and timely – not only will your outlook towards the importance and relevance of your goals change accordingly, but also your action plan to get there and your monthly and annual targets. For instance, instead of resolving to build a retirement plan starting 2021, aim for something more specific. For example, resolve to build a retirement fund of ‘x’ lacs/crores in ‘y’ years by saving ‘z’ rupees monthly and investing them in retirement plan ‘c’. Which one sounds more doable? The latter, right? After doing this, write down as to why you need to achieve this goal in this timeline, and how it will help you curate your life in the long run.
Develop a side hustle: Hustle Hard. That’s the motto that some people live by throughout their lives. Whether hustling hard makes you more successful or not is something we can answer, but having a side hustle definitely adds stability, muscle and diversity to your financial streams. Earning more means upgrades, greater savings, and more financial resilience when things are falling apart for most. However, when choosing a side hustle, working smart is the key – do not take up a side hustle that impacts your primary job or business. Instead, find something that you like doing, is flexible, brings money, and leverages your larger skill-set.
Make an investment habit: Habit is the keyword here – one-time investments and saving chunks of money in random months will not help you build wealth. However, even a small amount of savings done regularly – weekly, monthly, or quarterly – will help you build massive amounts of wealth in the long run. Check out this statistic if you are not convinced: Invest Rs. 10,000 every month over a period of ten years in an SIP with a 16% return rate, and you will have around 90 lacs with you in thirty years. That’s right – however, every month is the key to making such things happen. So build a savings habit, and invest wisely to watch your money grow.
Aim to be debt-free, ASAP: However, define a timeline depending on the size of your liabilities. If you have unpaid loans or credit card debt, your finances are already decaying every minute you leave them that way. Change this downward spiral into an upward curve – to make this happen, direct as much of your earnings towards unpaid loans and debts. When you are back to the ground level, you can start directing this money towards your savings, and start investing your funds. This will help you get out of the debt-hole and bring financial mobility into your game plan. Once your debt is gone, you can focus on taking charge of your life and working towards your personal goals.
If you are still reading this, then congratulations – you have already taken the first step towards a financially better next year, and the future thereafter. However, taking big leaps comes without shortcuts, and if you have one thing to take away from this article, then let it be this: taking up a resolution is the first step towards achieving your end goal, but the next and the consequent steps are simple: take action, and keep repeating it. Habit is the key to bringing about long-lasting change. As 2021 approaches, take firm financial resolutions and stand by them. Angel Broking wishes you the best on this new journey!