We’re coming up to the end of 2010, and a new year celebration is ahead, along with the traditional resolutions that we all make, to be healthier, to manage our money better, to spend more time with family and friends and less at the office (or vice versa!), and while we may or may not stick to all our resolutions, there are some that, if we do stick to, would certainly make life much easier.

 

These are the resolutions to manage our money better.

 

The best way to do so is to create a personal budget. Now, this may not sound like an incredibly exciting thing to do, but the benefits it will reap once properly done will be tremendous – not just in terms of awareness and peace of mind, but in terms of giving you the power to correct / tweak your cash flows into more suitable avenues.

 

So let’s get started.

 

RESOLUTION #1

 

Get organized about your facts & figures

 

Every individual has some facts and figures that are all their own. You have them too. But not everybody is aware or organized about these little data points. In 2011, you can choose to change this. Have a single file (to be stored in a safe secure location) where you have all the information you will need about your finances.

 

Here is the list of the important things you need to know:

 

1. Your bank accounts and passwords, holding status (joint, single etc), the cash in each account
2. Your PAN number (memorize it)
3. Your credit and debit card numbers, your ATM PINs
4. Your investment consultants and brokers, their contact numbers, the portfolios they hold
5. A record of your assets and your liabilities, with relevant details such as lock in periods, guaranteed returns if any, payments due (for your liabilities), rate of interest, payments pending and so on
6. A record of your insurance policies with similar relevant data as listed above
7. Your Will (if you don’t have one, make one – this is an excellent matter to take care of this year)
8. A consolidated statement of your net worth (assets minus liabilities)

 

Keep this information in a very safe place, and store a copy of it with a trusted loved one.

 

RESOLUTION # 2

 

Know your Life Goals, and work towards them.

 

If you want to take a foreign trip with your family and friends, start working towards it in January 2011. Know how much you need for your goals, speak to your Planner about how much you should be investing and where, and start.

 

Some life goals common to us all are:

 

1. Retirement
   This may seem too far away to start planning for now, but remember - it’s the ones who started early that had the most wealth at the end of the day. Start today, and you will be doing yourself a tremendous favour by giving your investments the gift of time.


2. Your kids’ educations and marriages
   A college graduation today costs anywhere between Rs. 5 lakhs (educated in India) to Rs. 40 lakhs (educated abroad). Add inflation of 10% each year, and if your child is 10 years old today, an education abroad is going to cost Rs. 86 lakhs in 8 years.


3. Buy a house
   Property has always been a big hit with individuals. At PersonalFN, we believe that if you are buying a home, it is an emotional investment, and it is always a good time to buy. If you are taking a home loan to do so, then read our article on home loans and speak to your financial planner to help you time the liability.

 

RESOLUTION # 3

 

Maintain a Personal Budget

 

Awareness is everything. The more you know about your money – where it is, where it’s coming from, where it’s going – the more you have the power to build your long term wealth. We can show you how to maintain a personal budget in a few simple steps – alternatively you can use our Wealth Tracker (personal budget tool, its Free) and generate neat reports, set up email alerts and receive analysis that will do all the work for you.

If you want to maintain it manually yourself, here’s what you will require:

 

1. All your personal finance data – your investment records, your bills, your standard payments (for example on any loans you may have) – all in one place. This is the basis on which you will be building your personal budget.


2. Know your Cash Flows – inflows and outflows
   Do you draw a salary or receive business income? Do you have any other fixed sources of income? Do you receive interest from your investments? Record all your inflows, and then move forward onto your outflows.
   What do you spend on? Maintain heads of outflows such as rent, EMIs, groceries, all bills (phone, water, society and other), commuting, clothes, discretionary expenses such as eating out and entertainment, and so on.


3. Record your Assets and your liabilities
   Put down details of each, and record any transactions as and when they happen in your cash flows section. For example, if you have a home loan, record each payment as it happens. If you earn dividends or interest on your investments, record each inflow on these assets under your cash flows section.


4. Now that you have all your information – Analyze it.
   See how much you are spending on luxuries (non essentials) and how much you are investing. If your investment per month figure is not up to the required mark, you can now see from your personal budget which expenses you can cut down on to boost your investments. You can also see how much is being spent on each member of the family, how much is being spent on different expense heads, and so on.


5. Lastly, it is essential to maintain your budget properly, update it as and when required, and review it regularly.

 

These 3 very simple resolutions will ensure that you get your financial life in order, and make the most of your capability to grow your personal wealth.

 

If you wish to speak with a financial planner, we can help – just Contact Us and we will help you get your financial life and your investments in order.

 

Here’s to a financially powerful New Year!

 

Happy Planning!

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Comments
kamuju@ibibo.com Dec 28, 2010 I'm just impressed by the way in which you are providing every bit of financial information handy to an individual. It has become one of my most favourite sites to watch and follow regularly. I take every opportunity to introduce it to my friends. Thanks a ton for your every valuable info!
yash.gujaran@gmail.com Dec 29, 2010 Excellent advice. Thanks Is it possible for you to throw more light on the process of writing a will? thanks again Seasons greetings, Happy new year to you all!!! Yashwant
shethsudha@hotmail.com Dec 29, 2010 just the thing I needed ! some one to coax me do what i knew had to b edone. I do make the resolution to follow your "RESOLUTIONS"as they arenew years gif tto us! Thanks

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