New Year 2024: 5 Money Resolutions That Can Help You Gain Financial Freedom This Year

With the new year 2024 already begun, most of us are either taking or hearing about some common new year resolutions, such as joining the gym, quitting smoking, travelling more, or learning a new kill or hobby. While all these resolutions are totally fine (provided you don't break them the very next day), there are some much-needed money moves that you can turn into financial resolutions for the new year 2024, especially after the COVID pandemic, mass layoffs, and recession fears served as a wake-up call in recent years.

Starting 2024 with these five money resolutions can help you gain financial freedom and lay a strong financial foundation for the new year.

5 Financial Resolutions For 2024

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1. Making an emergency fund for your financial best friend

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If the COVID pandemic, recession fears, and mass layoffs were not enough to serve as a wake-up call for you to build an emergency fund, then perhaps what will? Life's uncertainties every now and then remind us why an emergency fund is an absolute necessity.

This is the first step towards financial independence. An emergency fund acts as a cushion during financial emergencies that can be in the form of a sudden job loss, severe illness, disability, or significant pay cut. In all such adverse events in financial life that can temporarily hamper your income inflow, having an emergency fund is what can rescue you by helping you carry on with your recurring monthly expenses.

The mandatory recurring monthly expenses to factor into the emergency fund are your rent, utility bills, loan EMIs, monthly investment contributions (like SIPs), insurance premiums, your children¡¯s education fees, etc.

As far as size is concerned, it is usually advisable to have an emergency fund with an amount equal to at least six months of your recurring monthly expenses. The size can be even bigger, such as 9¨C12 times the monthly expenses, if you can maintain it.

2. Starting to invest with whatever amount you can

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Albert Einstein once called compound interest the eighth wonder of the world. Those who understand it earn it, while those who don't pay it. The magical power of compounding is something that has remained one of Warren Buffett¡¯s central principal investments.

The sooner you begin investing, the more time and scope you allow for the magical power of compounding to work wonders for you in the long run. It is one of the most powerful weapons that every person who becomes rich swears by. Compounding increases your invested money¡¯s value by getting the interest earned added back to the principal, thereby generating exponentially greater returns. This especially works wonders over the long term.

Also, even if you want to start investing with small amounts, mutual fund SIPs can be a great way to do so. Click here to understand its benefits.

3. Buying a life and health insurance policy right away

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No matter what your age or income is, insurance is not an option but a necessity for everyone. So, instead of choosing among the endless list of excuses, make the purchase of life and health insurance a priority in 2024.

Firstly, the primary objective of buying a life insurance policy is to provide a replacement income to your dependents in the event of your untimely demise. Make sure your life insurance coverage amounts to at least 15 times your average annual income. You can prefer purchasing term life insurance over other life insurance products, as it provides large life coverage at very low premiums.

Secondly, in addition to term insurance, it¡¯s equally important to have health insurance.

Keep in mind that having a health insurance policy with adequate coverage reduces the risk emanating from rising healthcare costs. Youngsters should also remember that even if their employer provides coverage under group health policies, such coverage is usually inadequate to meet hospitalisation costs, and such policies lapse once they switch organisations. This leaves you without health coverage until you get covered through another employer-provided health plan.

So without further ado, act quickly towards purchasing adequate life and health insurance for yourself and your family in this new year, 2024.

4. Tapping into the money-saving potential of a credit score

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Real estate, gold, stocks, etc. are among the first things that strike our minds when we think about assets. But what if we told you there was an asset you could possess without investing your money? In fact, that asset saves your money too!

Yes, you read that right.

Over the past decade or so, your credit score has become one of the most important parameters factored in by banks and other financial institutions while evaluating your loan and credit card applications. As a result, good credit scores, i.e., usually those of 700 and above, are no less than a crucial financial asset that has the potential to yield multiple benefits for one¡¯s financial health and even save money!

Click here to understand the different ways in which your credit score saves you money.

So, with the new year 2024, start focusing on the steps required in building or improving your credit score, and turn it into a financial asset that you can possess and utilise whenever you need loans or credit cards.

5. Adopting the habit of saving first and spending later

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In the words of billionaire Warren Buffett, if you buy things you don¡¯t need, you will soon sell things you need. That is exactly why most rich people tend to have the habit of saving first and spending later.

So, whatever your excuse is, stop cribbing about your inability to save and get rid of excuses like insufficient income, high expenses, or the urge to follow the Yolo (you only live once) motto. The key to saving lies in the habit of saving first and spending later. So, take this new year, 2024, as an opportunity to start this habit. Every month, set aside a part of your income as your savings. It can be 20%, 30%, 50%, or any percentage to begin with.

All you need to ensure is that you remain disciplined and stay true to the habit. And remember that whenever your income rises, increase the proportion of savings instead of splurging the additional money!

Also Read: How A Lost iPhone Led To Warren Buffett Investing Billions In Apple

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