The new year 2022 has almost rung in. Surely everyone¡¯s eyes must be beaming with the joyous moments and memories of 2021, right? But with the Covid pandemic still going on, it's not been an easy year for many.?
While it's a no-brainer that the importance of mental and physical health has begun to come into the spotlight ever since covid struck, it's equally important for us to also realize the importance of financial health. After all, the widespread income disruptions due to lockdowns in the past two years have been no less than a big wake-up call to show us the importance of financial fitness.
So, with the new year just around the corner, why not turn this into an opportunity to attain financial fitness and step into 2022 on a financially strong note? Wondering how? Read on as we explain some solid new year resolutions that can help your finances remain streamlined for the upcoming new year 2022 and beyond!?
Stay away from credit cards. They are pocket diggers and money eaters. Are these the first pieces of advice people give you when you pitch them your thoughts on taking a credit card??
If yes, then just pause and read this out. If someone has piled up credit card bills that signal a debt trap, is it the card user's fault or that of the credit card itself? Certainly the card's user, right?
So why unnecessarily demonize credit cards or put them in a bad light? Credit cards are, in fact, loaded with a lot of financial benefits like cash-backs, reward points, discounts, EMI facility, interest-free period, gift cards/vouchers, etc., which makes them a boon for your financial life, and not a bane. It's all about how you use and repay them. Discipline usage and timely repayments can enable you to maximize their benefits, whereas sloppy usage and erratic repayment behaviour are what can land you into a debt trap. The choice is indeed, yours.
Why do I need insurance when I have enough savings? Aren't insurance premiums too high? Shouldn't I take the insurance in later years of life?
If you are amongst those trapped in these questions, then probably you haven't understood the importance of insurance yet. Insurance is aimed to help you tackle the ¡®uncertainty¡¯ of life. Ever thought about how will your loved ones survive financially in case of your untimely demise? Or how will you pay the skyrocketing medical costs in case of hospitalization? The answers to both these questions are life insurance and health insurance respectively.
So if you have not yet purchased life and health insurance yet, then hurry up and do so at the earliest. The more you delay, the higher your premium would be!?
Also, while there are many life insurance products like money-back policies, endowment plans, ULIPs etc, term insurance is what often turns out to be the most suitable one. It not only offers huge life covers of at least 10-15 times your annual income, at low premiums but also includes the option of adding riders like critical illness, accident cover, return on premium etc.?
Besides life insurance, it's equally important to have adequate health insurance for yourself and your family, so that you get assistance in tackling high medical expenses. Two things to remember here.?
One, in the absence of health insurance, a single instance of hospitalization can wipe out your entire lifelong savings in one go, with the pandemic being the biggest example of the same. Secondly, even if your employer covers you under a health policy, do not remain solely dependent on it, as not only will the policy cease to exist when you leave that organization, but it can even turn out to be insufficient. In both cases, having separate health insurance for yourself and your family will be no less than a saviour during medical emergencies.
There couldn't have been a bigger wake-up call than the pandemic to show us how life can come to a standstill. After all, exigencies can strike us any day and in any form. And although it hurts everyone, it's the ones who aren't financially ready or equipped who are damaged the most. That's exactly what emergency funds are for!
An emergency fund can help you to tackle the financial aspect of life¡¯s exigencies which are capable of harming your income inflow temporarily, such as a sudden job loss or severe illness.?
So, for anyone who has not yet created this contingency fund to deal with rainy days of life, this new year can be an opportune time to do so! Ideally, your emergency fund should amount to at least 6 times your recurring monthly expenses like EMIs, rent, SIPs, utility bills, insurance premium, etc. You can go ahead to create a larger corpus like 9-12 times your expenses if your finances allow so. After all, the bigger your rainy-day fund, the larger cushion you have to fall back upon during hard times.
A good credit score, usually considered to be 750 and above,?is no less than a crucial financial asset today, with immense potential to yield multiple benefits for your financial health. From impacting your loan and credit card approval chances, forming one of the bases of your loan interest rates, to even being a part of job applicant¡¯s background check in some companies/industries, credit score¡¯s importance in our financial lives has been on a rise over the past years.?
So, doesn't it become imperative for you to build and maintain a strong credit score? Even if you think that you do not require a loan or credit card at present or in near future, it¡¯s still a prudent move to start building your credit score in order to remain credit ready for the future. by maintaining a high credit score. Wondering how to go ahead? Read here to know about factors that impact your credit score and how to build it.
If you are amongst those who blindly believe the biased opinions or hearsays surrounding the ¡®risky¡¯ mutual funds and why it's best to stay away from them, then it's time to pause and hit the refresh button.?
Yes, mutual funds do tend to involve an element of risk since they invest your money in various market-linked securities like bonds and equities, but that risk varies across different mutual fund categories and can even be managed through an appropriate asset allocation strategy, which helps in tackling market ups and downs as well.
Moreover, mutual funds?not only involve a wide range of categories and schemes that ensure there's something to offer for all investors, across different risk appetites and investment horizons, but even their returns have also historically proven to outperform most traditional fixed income instruments like bank FD, PPF, etc, especially in case of equity investments over the long term.
What more? If you wish to do away with the constant worry of timing the market, mutual funds offer the SIP route of investment wherein you can start investing an amount as low as ?100-500 at a particular date and frequency (like monthly, quarterly, etc.) And if you fall into the taxable bracket, then there are tax-saving mutual funds in the form of ELSS to help you achieve twin goals of wealth creation and tax saving!
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