GOOD HABITS - Ten Resolutions for Financial Fitness in 2016
It wouldn't be a New Year
without resolutions. Here are some to help you get started on the road to
financial fitness and to maximise your wealth in 2016:
1. I will not let my cash
lie in the bank:
The average inflation rate
from 2012-15 is 8%. This means, if your money is not growing at least 8%, your
savings are actually shrinking. So, it's time you move the cash lying in a 4%
savings account invest it. The laziest thing you can do is book an FD that will
give you 8% plus returns.
2. I will not invest in an
instrument I do not understand:
While it is important to
invest, do not randomly pick any instrument, especially , those you do not
understand. The authorities are doing their bit to protect you. The Ministry of
Finance came out with an extensive report on measures for curbing mis-selling
and rationalising distribution incentives in financial products last August.
Insurance regulator Irda has completely restructured Ulips and mutual fund
houses raised the bar of investment for high-risk schemes to `1 lakh from
`5,000. However, it is equally your duty as an investor to take precautions and
not to buy a product you do not understand.
3. I will teach my children
the basics of personal finance:
While you are educating
yourself, make sure to impart a lesson or two to your child as well.After all,
personal finance, although a life skill, is the only subject not taught in most
of our schools yet. In October 2015, CBSE launched the School Bank Champs
project that aims at educating students of class IX and X on managing finances
and investments. Currently this is available only at select few schools and is
a voluntary subject. In lieu of schools, the child depends on you for financial
guidance. So, while teaching them about the birds and the bees, add SIPs and
EMIs as well.
4. I will not be careless
with credit:
Retail loans have been
primarily responsible for driving credit growth of banks in 2015. Easy credit
and swiping facility at shop can be a dangerous combination. Add to that the
easy-to-use eWallets luring you with offers and online discounts.You need to be
a yogi to resist such temptations. Make a budget, stick to it and make it a
habit to pay back on time. Also, keep checking your credit score regularly ,
now that they are available for free on many websites.
5. I will update my
knowledge on e-frauds:
Barring, may be, the house
and your jewellery , all your assets can be accessed online. In 2014-15, as
reported to RBI, cyber frauds relating to NEFTRTGS transactions alone were
worth `80 crore. So, if you do not know about the frauds and take necessary
precautions, you you probably are committing financial hara kiri.
6. I will not put off
paperwork or planning:
Be it that mandatory KYC,
filing the tax returns, renewing an insurance plan or FD or planning your
goals, do not stall those tasks anymore.
7. I will plan my taxes
starting April:
Instead of making hasty
investments in January , start thinking about your tax bill at the beginning of
the financial year. Also, mark the calendar for advance tax deadlines.
8. I will not ignore my
insurance needs:
Life and health insurance
are not enough, they should be adequate as well. The government has been
promoting social security and it's time you upped your risk protection level. A
personal accident cover and a critical illnesses plan has become absolutely
necessary . Don't forget the travel insurance, especially on those
international trips. Also, do not wait for a disaster like Chennai to buy that
home insurance plan.
9. I will build an
emergency fund:
Not all risks can be
insured. Although all predictions for job and hiring prospects for 2016 are
positive, you still need that emergency fund worth at least six months of your salary
.Moreover, stop accumulating the fund in your savings bank account. Move it to
a liquid fund.
10. I will prepare a will:
All the planning and
hard-earned savings will be useless if you forget estate planning. If you think
it is a tedious legal task, you may be wrong. The exercise has actually become
easy with banks and NBFCs offering eWill services online. Also, do not forget
to specify a nominee when you make an investment or purchase insurance.
|
Chandralekha Mukerji
|
ET4JAN16
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