“This is Money” brings you Christmas and New Year wishes

If you have followed “This is Money” series through the year, where we have deliberated extensively on issues about money management – covering income, savings, budgeting, investment and retirement planning you would understand why we are wishing you best of Christmas and New Year Celebrations.

For specifics and reason for these wishes, our followers would have advanced a step in their financial planning in 2014 following our series, so they would definitely have
got good reasons to celebrate for a successful year of financial planning.

But for those who did not follow the series, there is still an opportunity to make amends in your financial planning as we begin 2015. This is going to start with making a financial resolution that would guide your income and spending going forward.

So, New Year’s, or the beginning of each year is usually a good time to reflect on the past and decide on things to do differently in the future.

Sustaining the resolution here is to avoid vague or impossible goals and instead decide on a set of very specific and achievable steps. For example, don’t say, “In 2015 I’ll get out of debt!” – It makes just as much sense as saying, “In 2015 I will lose weight.” Just as you need to break the “lose weight” resolution into small, manageable steps, you need to do the same when it comes to financial resolutions, and outline a detailed plan for how exactly you will achieve your financial goals for 2015.

Need ideas? Therefore, as we the current year draws to a close, here are a few financial New Year’s resolutions you should begin to consider now:

Create a monthly budget

Preparing a budget isn’t difficult – it just takes time. It will probably take you about two hours, and this will be time well spent. Having a budget and sticking with it is one of the most important ways to improve your finances and to avoid unnecessary debt.

It forces you to see the bigger picture of your finances, and to view single purchases in the context of that bigger picture.

Save more aggressively

This is actually part of planning a budget, but it’s important enough to justify a separate resolution. Finding places where you can cut costs and saving more aggressively will enable you to repay any debt you might have faster and to build an emergency fund.

When you go through the process of planning a budget, finding those expenses that you make out of habit but that you can live without is an extremely important step. For some people, it is recreational online shopping, for other it is eating out, some others it is something else.

Eliminating credit card debt

We all know that credit card debt is bad debt. The interest rate on a typical credit card balance is so high that it’s very difficult to pay down this debt, especially if only making the minimum payment. In fact, just making minimum payments can make even a small balance take years to pay off.

Start an emergency fund

Should you pay off credit card debt first and then create an emergency fund? Experts are divided on this one. Experts feel that paying off credit card debt should be your first priority. If you don’t have credit card debt, or once it is paid off, it’s time to start saving for an emergency fund. Try to have at least 6 months’ worth of living
expenses in your emergency fund.

Yes, it will take time to save that much, but the sooner you start, the sooner you’ll get there. Having an emergency fund will help you avoid resorting to using credit
cards and incurring new credit card debt if you ever stumble into difficult times, lose your job or incur an unexpected major expense.