Resolutions you should make in New Year 2019, and those you should break

“Last year's words belong to last year's language, and next year's words await another voice. And to make an end is to make a beginning.” 

These priceless words of wisdom from T S Eliot ring true even today. If you want to make yourself ready to welcome 2019 on a cheerful note, give your financial life a brand new kick-start this year with a much-needed ‘To-do’ list and a ‘Not-to-do’ list. Here are three financial resolutions to make and three financial resolutions to break this year.

Resolutions to make

A Change in Mindset for Saving: The first resolution to make is to change your mindset about money, especially when it comes to savings. Nagpur-based certified financial planner (CFP) Ranjit Dani says: “It is advisable that you cultivate a new mindset instead of thinking of income minus expense as your savings. Imbibe this new way of thinking: Income minus savings = expenses. That means, let 2019 be about saving before spending.” 

That seems easier said than done, doesn’t it? How does one save before spending? Dani explains: “It is important to learn how to segregate expenses as discretionary and non-discretionary and aim to reduce or eliminate as many non-discretionary expenses as possible.” In short, know your spending habits and then you will know how to save before spending. The easiest way to save before spending is to set an electronic clearing service (ECS) debit mandate for the day your salary hits your salary account. Transfer a fixed sum to another account for making further investments. Alternatively, you can also set an ECS directly towards a systematic investment plan (SIP) in mutual funds. As far as tracking expenses go, there are a number of apps that can help. But don’t get too stuck on a particular app, even a paper-pen method of tracking works well. 

Planning ahead for medical contingencies: The second resolution you need to make is to get prepared for emergencies, especially medical ones. The rising costs of healthcare can become a financial burden for your family and eat into your hard-earned savings. Relying on employer’s health insurance isn’t the best possible strategy in 2019. A personal medical insurance policy that covers you and your family is imperative. Financial educator, money mentor and founder of Finsafe, Mrin Aggarwal, says: “It is important that a nuclear family has adequate health cover — say, to the tune of about Rs 20 lakh to cover larger illnesses that might not necessarily be included in the corporate coverage the family members have.” Remember, you also get a tax benefit of up to Rs 25,000 on your health insurance under Section 80D. The elders in the family (your parents) above 60 years of age, if insured, can give you an additional 30,000 in tax benefits. 

Making a budget: An important resolution to make in your financial life is to make a monthly budget. But, you don’t need to be an excel-sheet expert; just write things neatly in rows and columns and you will be good. Even a simple strategy as a first step will work. Mumbai-based CFP and CEO of Moneyworks Financial Advisors Nisreen Mamaji says: “Make the right allocations — 50 per cent for household expenses, 30 per cent for savings and 20 per cent for recreation.” This should primarily get you set with the basic budgeting fundamentals. 

While the new year is an excellent time to make new resolutions, it is equally opportune to break some old resolutions — some old money habits that you might have picked up inadvertently and find no longer helpful. 

Seek professional help: When it comes to financial health, do-it-yourself (DIY) approach may not necessarily work for you, unless you are an expert yourself. Mamaji says: “Get out of the comfort zone in terms of making investments, ask for advice right at the start. Visit a planner.” 

We make comfortable investments, but we might end up paying an opportunity cost. Dani says: “Self-medication is extremely dangerous, consult an experienced, qualified, trustworthy advisor to evaluate current status, understand goals and chalk out a road map (financial plan) for you to start walking thereon.” Remember your friendly neighborhood insurance agent isn’t what we are referring to while seeking professional financial help. Avail of the services of fee-only certified financial planners to get unbiased financial advice. 

Avoid investing only for short term or for tax saving: Agarwal says: “Break the habit of investing only to get a tax deduction.” This perhaps is one of the most common bad habits that you picked up over time. The reason why many make this mistake is that they don’t plan investments in advance and wait till the last minute, which is January, to make investments — that is when the office asks for income-tax investment proofs. And in the last minute, all you end up making is tax-saving investments that might not even suit your financial needs. 

Last but not the least, take time off: A money habit that many have made unknowingly as a resolution is the lack of money management education. Agarwal says: “Give dedicated time for money management.” So, instead of Netflixing all weekend, spend some time learning how to manage your money better.