Every New Year brings with it a new start, a reason to begin again, a time when we promise ourselves to do something different. That's why we make resolutions. We are sure that you care about your money. After all you spend a significant portion of your life, and a considerable amount of your efforts and resources to earn it. So it makes sense to make some resolutions on your financial life as well!
As a rational investor you should keep the following factors in mind before making any financial decisions in the year to come:
Save more money - Saving can be viewed as the practice of paying oneself first. Most people save money, but how much remains an individual choice. You must draw a plan for your financial needs and figure out exactly how much you want to save and how you'll allocate those savings (cash, equity, gold, etc.). Many tools are available online to help with this.
Spend less cash, have a digital wallet - We are moving towards the cashless economy. The next phase is the digital economy. You should keep eye on upcoming technology which is set to change the face of the financial world. A digital wallet is a necessity, not merely a luxury. It can be net banking on your smart phone or services like PayTM.
Start a budget - As mentioned above, there are dozens of tools available in the market which will guide you on spending and investment but you should create your own budget which will meet your financial needs without stressing your income level.
Smart Investors prefer investment in growth assets - growth assets are typically those assets that have the potential to give capital appreciation over the long term, as against generating current income. Examples are equity shares, equity mutual funds, real estate and gold. These assets help in building wealth. Generally a balance of income assets and growth assets would be required for an investor at any life stage, but the asset allocation will differ. The role of proper asset allocation for achieving investment success cannot be understated, so avail of some of the many tools online that can help you with this. Here are some quick rules of thumb:
Mapping Investments and Goals
|Financial Goals||Types of Asset Class|
|Buying a Car||Debt & Money Market|
|Buying a House||Debt & Equities / Diversified Mutual Funds and move to Debt and Cash|
|Child's Education||Equities / Diversified Mutual Funds and move to Debt and Cash|
|Child's Marriage||Equities Diversified Mutual Funds & Gold and move to Debt and Cash|
|Retirement||Equities / Diversified Mutual Funds and move to Debt and Cash|
|Wealth Creation||Equities / Diversified Mutual Funds & Real Estate|
|Inheritance||Equities / Diversified Mutual Funds & Real Estate|
The above chart is for illustrated purpose only
How long you let your investments compound is a major factor in determining how large they grow. So it's good to follow the old thumb rule that says invest as early as possible, as often as possible...and as much as possible! Much like India's freedom struggle, achieving financial independence is a slow process and one cannot hope to reach it overnight, over a few weeks or even a few months. However, every step you take in that direction will bring you closer to the goal. As always, before making any investment decisions please consult your financial advisor. Meanwhile, on the threshold of the New Year, we hope that 2017 brings you the needed discipline for a happy financial life!
The views expressed here in this article are for general information and reading purpose only and do not constitute any guidelines and recommendations on any course of action to be followed by the reader. The views are not meant to serve as a professional guide / investment advice / intended to be an offer or solicitation for the purchase or sale of any financial product or instrument or mutual fund units for the reader. The article has been prepared on the basis of publicly available information, internally developed data and other sources believed to be reliable. Whilst no action has been solicited based upon the information provided herein, due care has been taken to ensure that the facts are accurate and views given are fair and reasonable as on date. Readers of this article should rely on information/data arising out of their own investigations and advised to seek independent professional advice and arrive at an informed decision before making any investments.
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