10 Financial resolutions for the new year 2013

1. Spend less – Keep a check on your spending.

It sounds simplistic, but many people struggle with this first basic rule. Make sure you know what your job is worth in the marketplace, by conducting an evaluation of your skills, productivity, job tasks, contribution to the company, and the going rate, both inside and outside the company, for what you do. Being underpaid even a few thousand of rupees a year can have a significant cumulative effect over the course of your working life.

No matter how much or how little you’re paid, you’ll never get ahead if you spend more than you earn. Often it’s easier to spend less than it is to earn more, and a little cost-cutting effort in a number of areas can result in big savings. It doesn’t always have to involve making big sacrifices.

2. Stick to a Budget

One of my favorite subjects: budgeting. It’s not a four-letter word. How can you know where your money is going if you don’t budget? How can you set spending and saving goals if you don’t know where your money is going? You need a budget whether you make thousands or lakhs of rupees a year.

3. Pay off Credit Card Debt

Credit card debt is the number one obstacle to getting ahead financially. Those little pieces of plastic are so easy to use, and it’s so easy to forget that it’s real money we’re dealing with when we whip them out to pay for a purchase, large or small. Despite our good resolves to pay the balance off quickly, the reality is that we often don’t, and end up paying far more for things than we would have paid if we had used cash.

4. Contribute to a Retirement Plan

If your employer has a employee benefit plan and you don’t contribute to it, you’re walking away from one of the best deals out there. Ask your employer if they have such plans (or similar plan), and sign up today. If your employer doesn’t offer any type of retirement plan, consider an alternative. Work out a good retirement plan and make regular contributions to it.

5. Have a Savings Plan

You’ve heard it before: Pay yourself first! If you wait until you’ve met all your other financial obligations before seeing what’s left over for saving, chances are you’ll never have a healthy savings account or investments. Resolve to set aside a minimum of 20% to 25% of your salary for savings BEFORE you start paying your bills.

6. Invest

If you’re contributing to a retirement plan and a savings account and you can still manage to put some money into other investments, all the better. Don’t just save money, invest it in proper asset classes according to your future needs and requirements.

7. Maximize Your Employment Benefits

Employment benefits like EPF, flexible spending accounts, medical / health insurance, etc., are worth big bucks. Make sure you’re maximizing yours and taking advantage of the ones that can save you money by reducing taxes or out-of-pocket expenses.

8. Review Your Insurance Coverage

Many people are paying too much for life and disability insurance, whether it’s by adding these coverage to car loans, home loans, etc., by buying whole-life /endowment/ULIP policies or by buying life insurance when you have no dependents, when term-life plan makes more sense. On the other hand, it’s important that you have enough insurance to protect your dependents and your income in the case of death or disability.

9. Update Your Will

Most of them don’t have a will. If you have dependents, no matter how little or how much you own, you need a will. If your situation isn’t too complicated you can even do your own will with very little effort on a simple paper with two witnesses. Protect your loved ones. Write a will.

10. Keep Good Records

If you don’t keep good records, you’re probably not claiming all your allowable income tax deductions and credits. Set up a system now and use it all year. It’s much easier than scrambling to find everything at tax time, only to miss items that might have saved you money.

Reality Check

How are you doing on the top ten list? If you’re not doing at least six of the ten, resolve to make improvements. Choose one area at a time and set a goal for incorporating all ten into your lifestyle.