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5 New Year resolutions that will make it easier to achieve your financial goals in 2023
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Disclaimer: This Article is for information purposes only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. The Bank makes no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Article. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from the Bank. The Bank, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein. Tax laws are subject to amendment from time to time. The above information is for general understanding and reference. This is not legal advice or tax advice, and users are advised to consult their tax advisors before making any decision or taking any action.
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Every time New Year Day comes along, people all over the world make new resolutions for the coming year. Some resolve to prioritise their health, others resolve to travel more, and yet others decide to save more money. If you have a goal that’s along these lines, you’ll need some effective ideas to make it easier to achieve your financial targets in the new year.
What resolutions can you make on New Year Day this time around so your financial goals in 2023 become much more achievable? Let’s find out.
1. Create an emergency fund
An emergency fund is often overlooked as something that’s not so crucial in the journey to achieving financial independence. However, by having an emergency fund in place, you can actually protect your savings and investments from being eroded in case of any urgent financial requirement.
Think of it this way. If you have six months’ worth of income saved up, and if you suddenly lose your job, you need not tap into your savings or break into your investments to support your family during the period of temporary unemployment. Instead, your emergency fund can get you through this tough period while you look for a new job.
2. Secure your (and your family’s) financial future
Life insurance is another important financial product that can secure your savings and investments. It protects your loved ones in case something untoward happens to you. So, your family will not have to resort to borrowing money, breaking into the existing investments, or selling assets they own in order to meet their everyday financial requirements.
That’s why this new year, checking the box marked ‘insurance’ is a worthy resolution to have in 2023. You can start by purchasing a term life plan in case you do not already have a life cover. Alternatively, you can also choose to get an endowment plan if you wish to get the advantage of both death benefits and maturity benefits. A Unit Linked Insurance Plan (ULIP) is another kind of life cover you can consider buying if you want the benefit of insurance and market-linked investments in the same plan.
3. Start an SIP
One of the best ways to achieve any financial goal is to save up for them diligently. A better way, of course, would be to invest money towards a goal in a disciplined manner. You do not even need a large sum to start investing because, with a Systematic Investment Plan (SIP), you can invest small sums of money too. Often, you can start an SIP with as little as ₹100.
SIPs are typically ideal for investing in mutual funds. You can start a SIP to invest in a mix of debt funds, equity funds, hybrid funds and even index funds, depending on how much risk you can take on, the investment horizon applicable to your financial goals and the kind of returns you expect.
4.Do a bit of tax planning
Another important resolution you need to take this year is the decision to do some tax planning. Without a clear understanding of how taxes work and what you can do to minimise your tax burden, you may end up spending a huge chunk of your income on taxes alone. This is especially true if your income puts you in the highest tax slab of 30%.
So this year, consult a tax planning expert or read up on how income tax works. Get to know how the old and new tax regimes work, what tax deductions you can avail of with your current financial portfolio, and what measures you can take to optimise your tax benefits further.
5. Improve your financial literacy
The last — and perhaps the most important — the resolution you can make in 2023 is to improve your financial literacy. Understand how investments work in the Indian financial market, get a better idea of how your risk profile impacts your portfolio and what you can do to rebalance your portfolio periodically.
Financial literacy also includes learning about basic budgeting. This is, in fact, the first step towards achieving any financial goal you may have — whether large or small.
Conclusion
These small and simple steps can make it easier for you to check off your short-term financial goals in the coming year. As for the medium-term and long-term goals, those may take a while because they have a time horizon lasting longer than a year. Nevertheless, the resolutions discussed above can get you closer to achieving those financial goals too. So, pick as many of these resolutions as you think are achievable, and make a plan to stick by them this year.
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