If you're setting plans for the year 2022 and are serious about keeping them, consider including some financial resolutions to help you plan for the future. The ongoing Covid epidemic has taught us the value of maintaining a savings account and an emergency fund. The majority of people, particularly young earners, still lack these critical buffers. Here are five financial resolutions you may set for the New Year to help you get a better handle on your finances.
New Year Financial Resolutions:
Make a spending plan and stick to it
It may feel restrictive to stick to a budget, but it is necessary if you don't want to get into debt. A budget can assist you in determining what you can afford to spend and identifying areas where you are overspending. To begin, just record all of your daily spending in a notebook so that you can see where your money is going each month. Also, make a list of all your fixed expenses, such as rent, EMI, phone bills, energy, workplace travel, and food costs. Now you can see how much money you have left over for discretionary items like entertainment, leisure trips, clothes, and so on, and aim to stay within that budget.
Pay your credit card balance in full
Your credit card bill payment record is a key sign of your financial health, and lenders use it to assess your ability to repay a loan. If you can't pay off your credit card payment in full each month, it means you're spending more than you earn and won't be able to service your debts. This has an impact on your credit score. Paying your credit card bill in full not only increases your card usage rate, but it also lowers your interest costs. So only spend what you can pay back in full before the card's due date.
Establish an emergency fund
It's critical to have an emergency reserve equal to six months' worth of spending, including any loan EMIs. So, if you don't have an emergency fund yet, make it your first financial resolve and begin building one the following month. You may have to give up some discretionary spending for a few years to build an emergency fund, but it is well worth it because having one gives you financial security and confidence.
Purchase both term and medical insurance
Aside from having an emergency reserve, obtaining term and health insurance is also necessary. If you are married, you should get a family floater medical insurance policy, which will cover your complete family for a modest monthly fee. In addition, term insurance should cover at least ten years of your yearly salary. So, if you don't already have these coverages, set a budget and get them right now. Reduce your discretionary spending if necessary to pay for these insurance premiums.
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