We read or listen to ‘tips’ with great interest, from beauty tips to travel tips or even financial tips, but, seldom do we actually follow them. As we enter 2010 and every magazine encouraging you to make New Year resolutions, we share with you some ‘tips’ that can be followed with ease to allow you better control over your finances.
The close of 2009 was sombre; with the financial turmoil came the feeling of being enveloped in insecurity, which led to a lot of stringent measures, both in corporate and personal finance. It has made us realise that we need to be prudent, we need to salt away more savings and be prepared to add to our skills. Though it is always better to try to earn more, we do not look at how to save more or even make our money work harder for us and this is something that we need to address in 2010.
The eight money tips for 2010 are really very simple notes reminding you of what you already know. Here is the time to put them to practice.
Take control of your debt
Be it your housing loan, auto loan or your credit card, learn to reduce debt to the bare minimum. Go easy on high cost loans such as credit card debt, car and personal loans. Pay the entire balance on your credit card bills as the interest charges are the steepest on this. If you are planning a luxury holiday, check to see if a small part of the budget can go towards pre-payment of your home loan first. Try to transfer credit card balances to cheaper providers and tell yourself to stick to a cash- only policy till you make your payments in full.
Save money systematically
A monthly committed saving in the form of recurring deposits at a bank, systematic information plans (SIP) of a mutual fund, or monthly savings in gold exchange-traded funds, can help you put aside money that will otherwise have been spent unnecessarily. You could also make investments for tax benefits. You could invest in public provident fund, equity linked savings scheme (ELSS), national savings certificate, life insurance, senior citizen saving scheme 2004, post office time deposit account. And instead of making lump sum payments for tax rebates at the end of the financial year, invest in SIPs for the ELSS tax savings schemes or make monthly / quarterly payments for your insurance policies.
Save on taxes
Many people do not avail benefits and allowances that are due to them under various tax saving schemes because they have not planned for it or sometimes are not aware of what they entitled to. Since tax planning has to be customised to suit each individual, consult the tax planner at your work place. He will take you through all the benefits you are entitled to – for the various aspects of your income (the salary, the allowances, benefits, perks, etc.). This process will enable you to make optimum use of the benefits.
Spread your investments
Allocate your savings into different asset classes – debt, equity, pension funds, insurance, real estate and gold. This will help balance the vagaries that the market exposes your investments to. And if you are invested in equity, do not get carried away with mob mentality. Research well. Prioritise your investment in fundamentally strong and dividend yielding companies since such stocks help ride the market vagaries and cushion your portfolio.
Review all your investments periodically.
Do this to your insurance plans as well. Considering the changing market dynamics, it is prudent to review the performance of your investment on a quarterly basis. And if you find duds, wean them out of your portfolio.
Create a budget
Write down your daily expenses, create a budget and stick to it, even if it is for just a week – most of us cannot manage within a budget, however liberal it may be. It makes sense to practice staying within the budget (and curb the desire to reward yourself lavishly for having stuck to it!)
Spend wisely and get money wise!
It is amazing but true and each of you will have surely experienced this at some point or the other – you step out to buy a loaf of bread, but you get back home with cheese spread, apples, a soft drink, a couple of packets of chips, and maybe even a chocolate bar. Monthly grocery shopping lists are seldom adhered to. There are so many new things to try and am sure you will be tempted to try atleast a few each month – the new fragrance brand or hair fall control oil, that are placed strategically near the billing counter, where you will have the time to see them as you await your turn to bill. I admit being guilty of doing just the same thing. Steel yourself to put down the article that you just meant to take a look at. On the shelf, not in your shopping basket.
Take on small projects that make your home and office energy efficient – get some fluorescent bulbs, switch off the air conditioners when not in use. Make conscious efforts to save power, water and food at all times.
Make discount shopping work for you, and not for the stores. One plus one free is passé. There are mega bargains aimed at loosening your purse strings and these marketers are a committed lot, they mean to do just that. Guard against these threats.
Power of documentation.
Document all your assets and safeguard all relevant papers. Make nominations for all your accounts. Draw up a will, even if its not going to be needed right away, you will realise a lot about your own worth.
Wish you all a fun filled and eventful 2010, may prosperity and peace be yours.