These days we are gradually overcoming a long-standing taboo – going beyond what our parents taught us regarding personal financial management. So it’s time to ask the most basic personal financial questions and check financial status. Here are some elementary questions that are pivotal for your financial outcome for the New Year.
How is your credit score?
How much debt you have to pay? How much further debt you can ensure this year, if you need? That’s your credit score. It’s basically numeric rating, which is determined by credit bureaus. It impacts your entire adult financial life; there can be no excuse in ignoring it. You can determine it on line or based on questions like, liabilities for EMIs and, present income plus probable rise in income.
Assess how much debt probably you need to take in this New Year and how much you can save this year?
Determine your financial responsibilities, set realistic financial goals, like saving for a down payment for home or car, paying off a certain amount of debt and fix target for saving. Sum up all your outstanding credit. Determine if you will ever need credit this new year and when and how much. It’s going to determine your new financial year. Determine what strategies you need to follow to meet the responsibilities and attain the goals. Take time to determine if you need lifestyle changes or automating with apps. In this volatile financial world Loans like credit card debt, personal loans, and car or home loans should always be paid off as soon as possible.
Do you have right insurance coverage?
Are you financially sufficiently covered with insurance? If not, then ensure it. Determine your right insurance coverage based on your income, expenses and existing liabilities. It is important to check that you are not under or over insured.
What about your financial assets?
What is sum total of your financial assets? Sum your Fixed Deposits, Emergency Funds, Equity holdings (including equity mutual funds), Cash in Bank, should be put together to arrive at that figure. Is it growing, make sure of its growth. This determines how much of a “liquid” (cash or instruments that can be converted into cash instantly, if required) safety net you have as of now.
How much did you save this year?
Calculate this, consider if could have saved more. If you failed to meet goals, what are the reasons?
Did you get the most out of your credit cards in this year?
What did your credit card(s) give you this year – something like rewards, lower interest rates or cash back? If not then consider upgrading to a different card. Ensure to use them in the best way and that they aren’t inadvertently hurting your credit.
How much money will you make in the next year? Can you make more?
Whoever you may be, consider whether there are ways you can grow your income in every possible ways. It is not needed to scratch the heads or may be skulls for the whole long month or visiting the never known money men door to door or even browsing internet for the whole long day. The resolutions always wait at your door steps if you have power to take the real oath. Before everything you need to shape up your mind and stop the projects and habits that drain your resources which may be fruitful in your future months.
How much money is in your emergency fund?
In an ever increasingly globalised financial circuit, uncertainty is what we all are to live with. There can be sudden health crisis, unexpected layoffs, or a downturn in business. Is your emergency fund (about three to six months of living expenses) robust enough to take care of you if need be. Ensure that there is a healthy emergency fund based on your responsibilities and priorities. Always save 20 percent of your income as a general rule.
How to budget for the next year?
Budgeting helps people control their money. Start with the question how much control do you need. After a robust review of the financial year (as indicated above), you now know what has (or hasn’t) been working for you. If you are newly married you may need merging finances and financial goals. Do you perform better on a less stringent budget and/or you actually need more structure? But above all you need to understand what the poor money habits that you can squash are.