New Year resolutions in 2016

Nifty delivered   5% negative in 2015. Expectations gone but hope remains! Real estate prices are moving southward in many cities. Gold prices correcting two year in a row. Deposit rates going down. Banks deducting TDS on interest of all deposits. Current challenge is to earn interest to beat  the inflation rate. With volatility in equity market, aim should be to generate returns above the benchmarks in equity. However for long term investor, equity is the best asset class.

We must educate our children well and help them to settle in their career. We must accumulate adequate retirement corpus to last our life time. Stick to your financial goals.  We suggest visiting the following resolutions in the New Year.

 1. Create an Emergency Fund

Future is uncertain. One may lose job, income may decline or any family member may have to undergo major medical treatment etc. It is advisable to keep sufficient cash either in  Liquid Mutual Fund or Bank to meet three to six months of expenses.

 

2. Set Financial Goals 

Dream your future and set specific, measurable and achievable financial goals i,e Buying a house, Saving for Children’s higher education , Buying a car, Going for vacations, Creating adequate      retirement corpus etc. Also set time horizon for each goal and prioritize them since your current income may not be sufficient to achieve all the goals at one go.

3. Get rid of Toxic Life Insurance Policies;

Do not mix up your  Insurance with investment. Endowment, money back and ULIP policies are combinations of insurance and investment. They are also packaged as child plans, pension plans etc. It is advisable to take adequate Term Insurance for protection to enable the family face any untimely and unfortunate demise of the bread earner of the family. Online Term insurance are cheaper and popular now.The cover should be at least 8-10 times your annual income. You may surrender the toxic insurance policies.

4. Take adequate Health Insurance

You can take family floater policy if you are young say 40 years or less and prefer individual policies if you are above 40.It is advisable to  take a base cover and top up it with a super top policy. This combination of a base policy and super top up will be cheaper.  

5.  Save regularly and invest long term

Before investing, you should know your risk tolerance and risk capacity. Your investment should match your goal horizon. You should display patience and stay the course. Regular saving and investing preferably through SIP is better than trying to time the market.

6.  Do not put all your eggs in one basket

Asset allocation is key to wealth creation. You should spread your investments into various asset classes i. Equity (Stock and MF), Debt  (Bank FD and Fixed Income Securities),Real estate and Gold. Take the advice of a professional to decide the proportion   of each asset in the portfolio.

7.  Monitor your portfolio

In constructing your portfolio, you should optimize on safety, liquidity, return, risk and taxation. You should monitor your portfolio through rebalancing and ensure that your net worth is increasing every year.

8. Do your Tax Planning

Calculate your EPF, PPF, SSY, Home loan principal repayment and Life insurance premium. If there is a shortfall to Rs1.5 lakhs, go for ELSS to get the full 80 C benefit. You can invest additionally Rs 50,000/- in NPS to get income deduction under section 80CCD. You can also avail 80 D benefit of Rs25, 000/- for medical insurance premium. Further you can also get benefit upto Rs2 lakhs for home loan interest. The Insurance companies hype their JFM activities  to push their products and hence exercise caution on offerings from Insurance agents and Bank relationship managers.

9. Ensure nominations and make a will

 All your financial assets should have nominations. You should not forget to prepare  a will which should always be attested by two independent witnesses. Handwritten Will in a plain paper is a valid will.

10. Digitize and e- store your documents

Convert all the personal documents of the family members i.e birth certificates, school & college certificates, pass port , PAN card, property titles etc and e store them in any secure e storing sites. For details you may like to visit (Learning-from-chennai-flood)

11. Do exercises regularly

Regular exercise besides proper food and sleep are essential for good health.In the five top most personal priorities health comes first followed by family, job( With work life balance),passion and friends(Rather associates!)

12. Donate for the social causes

Helping the poorer sections of the society improves your happiness index. 

Lastly, if you do not have time or are getting confused in handling personal financial matters, it is always preferable to approach a Fee only certified Financial Planner and SEBI Registered Investment Adviser who are client centric in their approach.

Last modified on Wednesday, 10 February 2016 06:08

Prakash Praharaj

Shri Prakash Praharaj has a passion for excellence. He has been awarded two gold medals for securing top positions both in Graduation and Post Graduation in Commerce. He is an MBA with specialization in Finance and marketing. He has been awarded Diploma in Treasury, Investment and Risk Management besides CAIIB from the Indian Institute of Bankers. He is a Certified Financial Planner from the Financial Planning standards Board, India (FPSB), affiliated to FPSB, Denver, USA and Certified Personal Financial Adviser from NISM. He is also a SEBI registered Investment Adviser vide Reg. no. INA 000000045 dated 2nd August 2013.His book "Your Every day guide to Personal Finance and Insurance" has been published by CNBC TV 18 in August 2015.

6 comments

  • bulu das

    posted by bulu das

    Wednesday, 06 January 2016 11:58

    Excellent one, very helpful.

    Report
  • lizy mohapatra

    posted by lizy mohapatra

    Wednesday, 06 January 2016 11:57

    Thanks for the article

    Report
  • Sujata Aniruddha Sapkal

    posted by Sujata Aniruddha Sapkal

    Wednesday, 06 January 2016 11:55

    Very essential steps for financial well being.

    Report
  • durga

    posted by durga

    Wednesday, 06 January 2016 11:42

    Good article!

    Report
  • Sujata Aniruddha Sapkal

    posted by Sujata Aniruddha Sapkal

    Wednesday, 06 January 2016 11:32

    Very essential steps for financial well being.

    Report
  • Srinibas Swain

    posted by Srinibas Swain

    Thursday, 31 December 2015 08:04

    Dear Prakashbabu,
    This article is a well presented basics for a happy life, which many of the times, most of us miss to emulate!

    With warm regards and wishing you and your family a happy, peaceful and prosperous new year!

    Srinibas.

    Report

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