Importance of Financial Resolutions

The first few days of the new year are a good time to take a look at the year gone by, things achieved, things overlooked, and plan for the coming year. Today's spending habits tend to be on the extravagant side, and as a result it is important to check one's financial position and habits. Keeping financial resolutions and ensuring that you abide by them can go a long way in bettering your finances. This would also result in improving other aspects of life, such as taking a holiday, expanding your business, buying a new house/ car/ two-wheeler or just saving for retirement. All of these items require a high degree of financial discipline and strategy, and this is where Financial Resolution come in. A few relevant financial resolutions with a high degree of applicability are listed below:

1. Combat Financial Troubles - Planning ahead can help combat financial troubles arising from relentless spending later on. Most people who plan their finance often report being satisfied, happy, and comfortable with their money versus people who do not plan their finances.

2. Aids Debt Reduction - A good financial plan will aid you to move swiftly, without breaks, to a debt-free life. Outstanding debt is often reported to be the greatest strain on a person's financial status. Financial planning aids and maps the progress one makes in controlling and eliminating their debt.

3. Helps Measure Expenses - Overspending is an area of concern among millennials. Financial planning can help track expenses and restrain overspending. Once you review your expenses, it is easy to restrict, avoid, or change expenses that put a bigger dent on your financial plans.

4. Maximize Your Money - A good financial resolution will help maximize your money. For instance, look at your credit card and calculate the interest amount you are paying. If you aren't earning more interest on your investments than you are paying on your expenses, it's time to change the way you spend. Spend on a health plan using flexible spending plans that use pre-tax money instead of spending through cards, cheques and other such modes.

5. Minimize Risks - Financial plans will give you a detailed outlook on risk identification and management. If your ability to earn gets affected by disability, disease, or loss of employment, a sound financial resolution will help you during the time of crisis and help steer towards a better overall financial position.

The easiest trick to sticking to your financial resolutions is to set smaller goals till you make it to the bigger ones. Here are five quick means by which you can set effective financial resolutions:

1. Know What You Want - Concise, to-the-point goals often help more than generic high level goals. Set fixed goals like, "I'd like to have X amount of money in my account by the end of this year," instead of "I want to save money this year."

2. Prioritize Your Debts - Debts are often interest-based payments and it is important to ensure you pay these off immediately. Make a list of all your payments and investments and compare. If you are paying more debt than the amount of interest, it's time to change your spending habits.

3. Make Time-Bound Goals - Create and stick to a timeline. Ensure that you set goals of when you want to be debt-free or how much you want to save up by a particular period of time for a home/car you want to buy or pay for college or any other expense. Consult a financial planner and get rid of all kinds of debts.

4. Start Investing - Good financial planning that lets you retire easily starts early. Investment is often one of the keys to financial success. Save money and grow it at a regular pace using Automated Savings Plan (ASP) or you can contact a financial planner if you are ready to invest but you don't know where yet.

5. Commit to No-Spending Days - With our current lifestyles, we tend to spend excessive money while shopping, eating out, or indulging ourselves. One should commit to no-spending days so that you can stabilize your lifestyle. It will not only save you a lot of money but also ensure that you do not fall prey to lifestyle diseases and protect from subsequent health-related expenses.

Global markets are at an all-time high, but so are our expenses. With a new age philosophy of earn now, spend now, a lot of people have started living from pay check to pay check, setting a dangerous financial precedent. Set realistic financial resolutions this year to get the most out of the hard work you put in to earn that money. You may start small, but at least start.