Financial resolutions for 2008

Check your bills

It always pays to read all the print—fine or otherwise. That’s how you’ll find out if you are paying for telephone calls you never made or for cigarettes you never smoked. More important, carefully check the transaction statements your bank sends you. All quarterly bank statements come with a disclaimer that puts the onus on you to point out any discrepancy in the statement within three weeks. So if there is a charge on a transaction that you did not make, and you do not report it, the bank assumes you agree with the charge being levied.

Collect your change

You know that old line about little drops of water making a mighty ocean, right? Now just keep remembering that 50 paise coins can add up to make thousands of rupees. So the next time you pop down to the grocery store, don’t get rid of all your small change. If the bill comes to Rs 18.50, for instance, pay Rs 20, get the change, and put the coins away in a container (a piggy bank adds to the tone, but a large biscuit box might be better). By the end of the year, you will have made a few thousands.

Start saving for a house

Will 2008 be the year you stop dreaming of your own home and start acting towards making it real? First, set yourself a savings goal; remember that you will have to make a down payment of at least 15% of the value of the house. Then work towards meeting that goal; set aside a portion of your pay cheque to go into the home fund. Invest the money according to your risk appetite. Keep at it, and you might find yourself owning your house sooner than you think.

Curb card use

Yes, it’s wonderful to be able to swipe that card and take away anything from air tickets to Zulu artefacts. But unless you’re disciplined enough to pay off your balance each month, it’s really not worth the cost. Apart from the high interest (36-42% annually) you’re paying, did you know a 12% service tax is charged on the interest component of your card spend? If you have a card with annual fees, there’s a service tax of 12% on this. It all adds up to a large amount of money, so you might find it pays to go back to paper money.

Read financial books

Almost anything you want to learn can be found in books (or magazines, for that matter). There are several good books on investing, on the markets, on savings and the like, which teach you how and why to invest, how to set up a good portfolio, etc. If you don’t want to plough through The Intelligent Investor or One Up On Wall Street, you can, of course, continue reading this magazine for the same wisdom in a far simpler form.

Replace bad debt with good

Essentially, out with credit card debt and in with something like a home loan. Loans that aid in asset creation—as home loans, for instance—or which help further your career—car loans might do that—are more assets than liabilities over the long term. These qualify as good debt. Bad debt is basically borrowing to pay for things that don’t increase in value and on which you pay a high interest rate.

Plan taxes

You can save a packet if you plan your taxes well. Not just in terms of which scheme, but in terms of planning when to invest in what. If you spread your tax-savings investments over the year, instead of keeping them for the last three months of the financial year, you can earn better returns. Invest Rs 5,000 every month in a tax-saving fund that earns 12% instead of putting away Rs 60,000 in three tranches. Your investment will be bigger by Rs 2,700 at the end of the year.

Cover your assets

Who needs insurance anyway? You do, especially if you have financial dependents. This might also be the year you should give serious thought to health insurance, especially if you don’t have any yet. Consider the market carefully and take stock of your needs and buy what insurance you need. Don’t over- or underinsure yourself. And don’t get taken in by agents.

HOW TO ACHIEVE WHAT YOU RESOLVE

Write it down

If you are serious about your financial goals, write them down. Clearly stating your goal and how to achieve it will keep your resolutions realistic. Take this a step further and write down why you're working towards the goal. That should help you re-focus when your resolution wavers.

Keep it small and simple

A huge goal, say buying a house or creating a large retirement nest egg, can intimidate you. To keep your goal from overwhelming you, break it up into smaller, short- term actionable steps. This will help you feel less discouraged, because you'll be able to see yourself making progress towards the goal.

Get professional help

Ask a financial planner for assistance. A planner will know more options that you know of, and can tell you the best way to meet your goals and can also keep the pressure on you to invest until those goals are attained.