Financial year 2017-18 has started with a bang with the Sensex touching 30,000 after a gap of two years. Nifty is hitting record highs. In the exuberance, there is every likelihood of individuals becoming drawn towards higher exposure to the equity market.
One of the cornerstones of a good financial plan is not to get overexposed to a particular asset class, be it equity, debt or gold. A balanced portfolio is always safer and is likely to give steady returns while guarding against market risks.
Also, whatever the market conditions, one should set his or her financial goals and take investment decisions based on those goals.
Here are seven money resolutions you should keep in mind during 2017-18 while preparing your personal finances to keep the long-term wealth creation going:
• Budget it right: Know your income-expenses statement well. Document it for each penny. This will help you understand your cashflows. Many times individuals fail to plan because they are not aware of their real money situation.
• Spend smart: Know what you ‘need’ and what you ‘want’. Buy what you need. Ask: Should you really buy what you want? You can cut down your expenses on your wants and channelize them into long term investments.
• Pay off debts: Make a list of your loans along with interest rate you pay on them. Start with expensive loans- credit cards outstanding, personal loans. Do not try to close loans on the basis of length of the loan or the quantum of the loan. Good loans such as home loans come cheap and can be repaid later as compared to credit card debt which is a high cost credit.
• Set financial goals: Define where you want to be – moneywise and timewise. For example, I want to buy a car five years from now which will cost Rs 15 lakh. Goals must be quantifiable, failing which it becomes difficult to prepare a viable plan for it.
• Allocate money right: Invest in a mix of stocks, bonds, gold so as to achieve your goals over the desired time frame. Stick your asset allocation and rebalance it from time to time. Do not forget to buy adequate insurance. If you overexpose yourself to a particular asset class, you stand to take extra risk. Instead go for risky asset class where you have long time on hand. In case of short term goals, keep your money safer avenues. Buying adequate amount of insurance ensures that you reach goals even if a peril hits you.
• Plan your taxes well: Use tax saving options to achieve your goals and also to reduce your income tax liability. Start now to avoid last minute decisions. Tax planning should be merged with overall financial planning.
• Do not procrastinate: The difference between success and failure of a financial plan largely depends upon time bound and disciplined education. Best time to start is NOW.