17 Financial resolutions for 2017

Merry Christmas!
The New Year is just around the corner and it is time for new resolutions!
Here are 17 financial resolutions to get started with:
1) I will get health insurance policies for my self and for my dependents 
According to this article written way back in 2014, room rates for well known hospitals are more than the tariffs charged by luxury hotels. Quartz goes on to write that India’s GDP between per capita based on purchasing power parity grew by 121% from 2004 to 2014 whereas average medical expenditure in urban areas grew by 176%. It is just too costly to fall sick!
2) I will get term life insurance policy for myself
Listened to the older members of your family and bought a money back plan? You are in big trouble! The returns offered by money back plans are next to nothing. And they hardly offer a decent cover for your dependents in case of your unfortunate demise. Not convinced? 
Let us take the case of LIC’s new money back plan – 20 years. You can access their calculator here to create your own illustration.
Let us look at their sample illustration given below:
If you survive for 20 years and pay Rs 7752 every year as premium, then the following would happen:
a) You would have paid 15×7752 (as you need to pay premium only for 15 years) = Rs 116280
b) Throughout those twenty years, if you passed away your family would get anywhere between Rs 1,25,700 and Rs 1,83,500
c) If you survived, you would receive anywhere between Rs 114000 and Rs 1,58,500
WHICH MEANS (EXCUSE THE CAPS LOCK AS I NEED TO MAKE A STRONG POINT HERE): AT THE END OF 20 YEARS:
  • BY PAYING RS 7752 YOU ARE GOING TO EARN ANYWHERE BETWEEN 114000 AND 158500 WHICH WOULD BE WORTH AROUND RS 28500 AS OF TODAY AND RS 39625 AS OF TODAY. CONGRATULATIONS FOR SUCCESSFULLY DESTROYING YOUR WEALTH!
  • YOUR INSURANCE COVERAGE WOULD BE OVER AND IF YOU NEED TO BUY INSURANCE IT WOULD BE PROHIBITIVELY EXPENSIVE

Rather if you buy a term plan from Edelweiss Tokio according to the options given here, (assuming I earn Rs 8 lakhs per annum + dont chew tobacco or smoke):
a) I pay Rs 6683 annually for which I get a coverage of close to Rs 80 lakhs
b) The coverage is for 30 years
b) Now you may argue that I won’t get my money back. But if I invest that difference of Rs 7752 – Rs 6683 = Rs 1069 for 20 years in a mutual fund that would offer me returns worth 12% per annum, I would earn Rs 10,68,089. WAIT! HOW MUCH DID YOU WRITE? 
YES THAT IS RIGHT – MORE THAN RS 10 LAKHS!! Check out for yourself.
So in the first scenario when you bought a money back policy from LIC, after 20 years, the best you would be left with:
a) Rs 158500
b) No life insurance coverage
In the second scenario when you bought a term insurance policy from Edelwiss Tokio, after 20 years, the worst you would be left with:
a) Rs 10,68,069
b) Policy coverage of Rs 80 lakhs for another ten years.
And in any case, LIC does invest your money in the markets.
3) I will begin investing in mutual funds. In case I have been investing, I will bump up my SIPs
This is an absolute no brainer. Read this beautiful case study about how long term investing through SIPs has made serious wealth.
4) I will only buy shares of good businesses and hold them for as long as possible
This article talks about veteran investors who have bought and held on to shares for several years. Mr Janak Mathuradas’s family have been share holders in Tata Group’s companies for more than 100 years. Although there are a few investors who hold shares of more than 100 companies in their portfolio, I would recommend that you take the advice of your finance investor or your CA who can guide you with a list of 10-15 good companies in which to invest for atleast a decade.
5) I won’t rely on tips to invest. I would rather research and analyze before investing
These cartoons explain it –
Image result for stock market tips cartoons
Image result for stock market tips cartoons
6) I will save first and then spend
Don’t decide how much you are planning to save by figuring out how much you need to spend.
Just reverse it!
Set up your bank account to automatically credit atleast 20% of your salary into recurring deposits and mutual funds. Offer your bank a mandate to do this during the first week of the month. It will ensure that you are able to follow fiscal discipline for the remaining days of the month.
7) I will track my expenses

Download Walnut in your phone. And thank me later.

8) I will avoid borrowing as much as possible
Yeah I get it about YOLO (You live only once)
But if you start supporting YOLO by LOCO (Live on credit Oh!), you would find yourself under a MODI (Mountain of debt infinitely). Now isn’t this going to anger some bhakts!
9) I will pay my entire credit card outstanding bill amount and won’t get into the trap of paying only the minimum bill amount
Read this to understand in detail. You will find yourself falling into a debt trap which would be harder than getting out of quicksand.
10) I won’t take personal loans to buy gadgets or go on holidays
Refer to point 8!
11) I will not underestimate the power of small savings
I will consciously aim towards saving atleast Rs 10 per day from my daily expenses. One way to go about this would be to walk some distance before catching a taxi or auto. You can read how by even saving Rs 500 per month one can make close to Rs 2.6 lakhs in ten years!
12) I will reduce the number of times I eat out
Size of your tummy reduces and the size of your wallet increases.
13) I will plan my retirement
Presently we are proud of our demographic dividend. We are among the youngest nation in the world. But doesn’t that also mean at some point of time we will be having several senior citizens to take care off. Wouldn’t it be great if most of them have taken care of their finances so that they aren’t a burden on society. If you are 30, set aside 10 percent of your income to be invested in mutual funds and keep increasing that percentage every year. If you are 40, set aside 30%. If you are 50, set aside 40% and invest most of it in debt funds. If you are 60, don’t give up. Save and Invest. You will thank me when you are 80. Here are some inspirational seniors.
14) I will pay off my short term debts as soon as possible

Personal loans and credit card loans have back breaking rates of interest. Not paying them off will not only keep you in a vicious debt cycle but also impact your CIBIL score. And this might hurt you whenever you are off to avail of that home or vehicle loan.

15) I shall buy a piggy bank
You may laugh this off. But when demonetization occured I knew I had close to Rs 3000 in coins which could help me when one can’t go cashless 😛 
It also helps to discipline a child in the house as a piggy bank is usually the first exposure to the concept of saving for her.
16) I shall read the following blogs:
These blogs have helped me in my journey of understand about personal finance and long term wealth creation. The authors of these blogs maintain integrity and sanity even when other participants in the market are getting carried away with bullish or bearish trends.

17) I will teach my children basics of financial planning

This would be one of the best lessons to bequeath to your little one. Educate yourself if you don’t feel confident and instill financial discipline and knowledge about investing in your child. This article has covered some very relevant points.

Here is hoping that you have a financially successful new year!

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