What are your financial resolutions for the new year?

Abhay is in his early thirties. He has a stable job and is married with a child. He did get some life and health insurance policies when he began working, but struggles to invest in a disciplined manner now. He has been working for many years but his investments are not enough to secure his future. He has managed to make small investments in bank deposits, shares and PPF. He wants to know what is amiss. He wants to build wealth, improve his standard of living and put together a decent retirement corpus. What are the financial resolutions Abhay should make to reach his goals?

The start of a new year is a good time to take stock of one’s financial status. First and foremost, Abhay must review his insurance needs in the light of changes to his marital and family status. It seems he is struggling to set aside a surplus to invest on a consistent basis. Here, an analysis of his spending pattern would help. There is a broad range of apps available, which can be used to keep track of one’s money. This habit will make Abhay more self-aware. He could commit to an automated saving plan to enforce discipline.

As Abhay enters the last quarter of the financial year, he has to avoid getting caught in the end-of-year frenzy and choosing tax saving investments without thinking twice. It is vital to understand his risk appetite and view tax-saving instruments also as a means to achieving his financial goals. This should help avoid last minute ad-hoc decisions.

For the next financial year, he must resolve to plan his tax-saving investments at the beginning of the year. Further, it is good discipline to review what you already hold ahead of making any new investments, so that you can effectively rebalance your portfolio to ensure that it reflects your risk profile.

If Abhay were to reflect on the happenings of the previous year, he might want to stay away from non-regulated, illiquid physical assets such as gold and property. Additionally, he might want to commit himself to paying all his taxes duly and to digital transactions in order to support the government’s drive against black money.

The unexpected results of the key market events of the previous year should also provide him an important learning to look at investing from a long-term view and avoid the perils of market timing. He might want to consider monthly SIPs to commit a fixed sum of money for a long time horizon.

(The content on this page is courtesy Centre for Investment Education and Learning (CIEL). Contributions by Girija Gadre, Arti Bhargava and Labdhi Mehta.)