8 important personal finance resolutions to better manage your money in 2023

For the Stoics, January 1 is just another day in their lives. Ask optimists and you’ll realize how many see this day as a new beginning in their lives. Some put off all that is good until this new day in their lives. When it comes to money matters, many allocate their resources to affirming their personal finance resolutions in the new year. Some of them are:

Buy insurance before others

We talk so much about investing and growing our money that most of us forget the need to protect our loved ones. Protect the interests of our dependents with life insurance should be a priority. You need to start with a life insurance plan that will meet your family’s financial needs in your absence due to sudden death. You can then gradually move to purchasing health insurance to reimburse medical expenses in view of the increased costs of hospitalization and subsequent medical treatment.

An emergency can knock on your door at any time. Do you have money to deal with an unforeseen situation? What if all your money is tied up in illiquid investments? It takes four days to redeem the maturity amount when redeeming a mutual fund. It can take around an hour to withdraw money from fixed or recurring deposits when due, underscoring the need to have enough bank deposits to meet emergency expenses. This requires the establishment of an emergency fund containing funds equivalent to six to twelve months of expenses.

Create a future source of income

You won’t stay young and healthy forever, nor will you feel like going to work all your life. To ensure adequate finances to meet your post-retirement expenses, you should either opt into a retirement plan to create a source of fixed income in the future, or invest in opportunities to earn returns that not only beat the inflation, but also help accumulate much-needed income. corpus. Alternatively, you can also invest in the National Pension Scheme (NPS) where your money is invested under your choice of fund scheme and fund manager.

List your financial goals first

Many people talk about investments without realizing why they are investing in the first place. Before investing, you need to assess how much money you are looking for and over what time horizon. This will help you decide on the types of investments you need to make as well as the length of your investment. For example, if you are young and have a broad investment horizon, you can stick to investing in index funds and large cap funds. If you’re looking to take advantage of the volatility of mid-cap and small-cap funds, you might as well put your money in flexible-cap funds. Alternatively, you can consider allocating some of your money to gold and real estate.

However, before deciding on your investments, determine your financial goals. Next, divide your goals into short-term and long-term goals. financial goals and the purpose for which you want to earn this amount. Only then will you have clarity about the choice of investments you should opt for.

Don’t make ill-informed decisions

So many people get into trading hoping to make extra money from the market without enough knowledge. Add to that the unsolicited advice on social media handles. Many have lost their lifetime income by paying attention to it. Don’t decide to trade unless you know how to value stocks based on their fundamentals. It is important to be aware of regular policy changes and market factors before deciding which stocks to buy, hold or sell. Options trading is another place where people lose more and earn less. Many people who have been buying and selling options for over a year often complain that their profits barely exceed the returns on their fixed deposits. So do your research before you trade.

It is an inherent nature of the market to be volatile. However, this should not prevent you from continuing to invest in mutual fund regularly through Systematic Investment Plans (SIP). While it’s okay to wait for a big drop before you can invest in a lump sum, you shouldn’t pause or stop your regular investments based on market movements. Although there is a common tendency to be prone to downside investments, pursuing your SIPs will ensure that your mutual fund investment returns remain in line with market returns.

Evaluate your goals frequently

You don’t define your financial goals and forget about them for the rest of the 15-20 years of your life. You need to review your goals regularly. This is also important because it will help you analyze investments beyond returns based on goals. Also, important life events like children’s college education, marriage, buying your own house, etc. force you to review your goals so that you can modify your investments accordingly.

Money management isn’t just a skill, it’s an essential subject that you need to master. Without knowing how to manage your finance, you can’t decide how to use your money to improve your future. A solid financial foundation is important for building and securing your future, which is why you should seek professional advice.