Financial Resolutions for 2021
The coronavirus pandemic threw everyone out of the loop in 2020. And as the year comes to the end, its time to reflect, reset and prepare for 2021. Year-end provides a perfect opportunity for us as humans to take a psychological pause and look at starting over things on an optimistic note.
So now is the time to devise a plan to get your personal finances back on track. Net Brokers have come up with top financial resolutions that our clients can make now for their financial growth in 2021.
1. Build an emergency fund:
Having a sufficient amount of emergency corpus can make the difference between muddling though a crisis or falling off a cliff. No matter how much is your salary or monthly EMIs, keeping a 5-10% of it in an emergency fund – preferably in a liquid and safe investments such as liquid mutual funds can make a difference in times of crisis. Investors should make it a resolution to have money saved in an emergency fund – 3x monthly income is a good start, 6x Is ideal and 12x would be good to have.
2. Spend within your budget:
Like slimming down your weight is good for your health, trimming the fat in your monthly budget is a good way to bolster the health of your personal finances. But like diet, this do need a discipline. Keep track of your income and monthly expenses, avoid unnecessary debts and try to cut down on impulsive spending. Learn the art of balancing the urge to spend and the need to manage your expenses within a budget, to keep your finances in order.
3. Define each financial goal as short, mid or long-term:
Categorize each financial goal as short, mid, or long-term with a specific target in mind and with a particular target date to complete the same. Below is the guide to help you define your goals
- Short-term financial goals: six months to five years
- Mid-term financial goals: five to 10 years
- Long-term financial goals: more than 10 years
4. Prioritize your financial goal:
Prioritize your goals and Label each goal as critical, need, or want. In case of shortage of funds, it will help you decide what to fund first. Suppose you have a short-term goal to build up your emergency fund and its “critical”. There is another short-term financial goal to renovate your office which is running just fine – that’s a “want”. If funds become tight one month, prioritising will help you know where to put your money first.
5. Seek financial consultation:
It is very important to seek the consultation of a professional & unbiased financial professional to help you in your financial planning and investments. With growing complexities of financial markets and plethora of funds available in the market from balanced mutual funds to multi-cap mutual funds, it is highly recommended to take help from a finance professional, who can chalk out a right investment plan for your based on your goals and risk apetite.
Many of us are more than happy to see 2020 come to a close. As you celebrate the start of a new year, think about the ways you can better your financial picture and have something to be proud of next December.
Happy New Year!