Wishing you a very happy new year!
2020 has taught us several things –
- Life is short.
- Jobs are temporary.
- Health is the real wealth.
- And we should always save money. Importance of emergency fund!
Did you always want to fix your finances? Here is an opportunity for you. I have noted down 30 important points that impact your finances, you can work on those things not all would be task some is learning.
I encourage you to read multiple books and blogs to gain a better insight into the subject.
This list is pure To do list. Let’s begin.
Download this excel worksheet which will be helpful on Day – 2, 3, 4, 7, and 13.
Day 1 – Download an expense tracker app.
This app will help you understand where and how much do you spend. Doing this on Day 1 is very important so you can do an analysis at the end of the month.
There are multiple apps that are free to use on both iOS and Android platforms. Avoid using excel here.
Day 2 – Compile all your income sources.
I am sure a lot of you would have multiple income sources, correct? Also, most will have investments made in stocks, bonds, FD’s, etc. Include all these sources of income either write down in a book or best use excel workbook I have provided at the start of this article.
This will help you evaluate how much you earn. Consider the post-tax income.
Day 3 – List down your liabilities
How much you owe is the most crucial thing to know. Always keep track of liabilities.
Do you know credit card companies charge up to 36% per annum in interest it comes to around 3% per month! Most saving banks offer annual interest on savings account of less than 3%.
List down all your liabilities in the excel workbook.
And if you wish to pay off, start with the most expensive one which will always be credit card debt then personal loans, auto loans, and at the end home loans.
Day 4 – Calculate your personal net worth
Your personal net worth will give you a clear idea of where you stand. Say for example you own assets worth Rs 100 and have liabilities in form of a loan worth Rs 150 you are in red. Your net worth would be negative.
Always own more than you can owe.
It’s important for you to understand where you currently stand with the help of this calculator. Use the excel workbook to calculate.
Day 5 – Save, Save more, Save as much as you can.
A rupee saved is a rupee earnt – learned this when I was a kid. And I live by this.
At least save 20% of your monthly income. This is the least you can do. Keep on increasing this amount every month of every quarter by reducing your expenses.
Don’t but things which are not important. Avoid them at all costs.
Day 6 – Sell your old and unwanted stuff!
This is important!
Find out your old unwanted stuff and get rid of it. Sell it and remember not to spend money on things that won’t matter after just a few days of use. This will help you save money.
Day 7 – List down your financial goals.
You now know how much you own, you now track your expense and try to save more, and also you have got rid of your old and unwanted stuff you are not financially detoxed :P, aren’t you?
It’s a crucial time now. To sit with your family if not alone to list down your financial goals.
Some of the examples of financial goals are – Paying off debt. Saving for retirement. Building an emergency fund. Buying a home.
Have a definitive timeline to achieve this goal.
Use the excel worksheet to fill in your goals.
I hope you are using the expense tracker daily and saving enough money!
Day 8 – Setup Emergency Fund.
Financial gurus recommend 5 to 6 months of expenses in emergency funds.
This fund should not be touched in any case.
You can keep this fund aside in a savings bank account or in a good liquid fund or even in a Fixed Deposit.
Don’t invest any money before setting up an Emergency Fund.
Day 9 & 10 – Find out where you would invest and how much
This task is big and important as well so we have 2 days to complete it.
If you have sound financial knowledge you would be able to take a good decision and would be able to identify the best investment option available for you.
If not, seek professional help.
I also recommend you to read books and blogs so you can identify the best-suited instruments.
Some of the instruments I use for investing – Mutual Funds, Fixed Deposits, PPF.
Remember to diversify your investments.
Day 11 – Learn to make some extra money at the side. [Side Hustle! ]
There are multiple ways you can earn more. The Internet had brought up multiple opportunities for you to make a quick buck.
A few things you can do to make extra money –
- Start a website, sell stuff online.
- Sell on Amazon and Flipkart.
- Start a blog and offer some service for a fee.
- Start a YouTube channel.
Many more.. I will write an article on this very soon.
A simple google search will give you multiple ideas.. Do that now!
Day 12 – Start a SIP or Recurring Deposits (RD)
Mutual Funds SIP are my favorite investment instruments. You can save a fixed amount every month.
If you are not comfortable with SIP then opt for RD.
SIP and RD’s will help you in saving your money systematically every month!
Day 13 – Evaluate your insurance need.
Check how much insurance cover you need based on the calculator in the excel workbook.
Select the best term insurance plan and start it early to avoid higher premium payments.
Avoid mixing insurance and investments. Keep these 2 things separate.
Remember to opt for sufficient health insurance as well.
I would soon be writing an article on the best term plans and health plans in India. Make sure you have subscribed to us through our email newsletter. If you have not – subscribe now.
Day 14 – Switch to a saving bank offering a higher interest rate.
A lot of good banks like Kotak Mahindra Bank, Indusind Bank offer a higher interest rate on savings account compared to other PSU and Private banks.
You might want to switch to one of these banks to earn higher interest.
Day 15 – Plan your annual taxes.
Tax planning is very crucial as you need to invest accordingly. Here is an interesting infographic on tax-saving instruments. (Source – ET)
Day 16 – Bank charges and other charges.
Thoroughly analyze your last year’s bank statement and see for any charges or fee which have been charged by your bank or any other financial institutions.
I was being charged a small fee by my bank for a service I didn’t need. I only came to know a year later. Though the amount was small I stopped it.
Only subscribe to the service which you actually need.
The same is for paid apps. Don’t pay for apps you don’t need and use.
Day 17 – Learn financial literacy.
You have come a long way we are on Day 17 now and over halfway through!
Let’s keep it simple today.
Google and find the best finance blogs to follow and even search for the best youtube channels you can subscribe to for finance-related news and updates.
Also, remember to subscribe to our newsletter – here.
Day 18 – Update your financial apps.
Banking apps and other financial apps should be updated as soon as there is an update available.
An app that is not updated is venerable to get hacked.
Keep your money safe and secure.
Don’t trust unknown websites while shopping online. Use only the known once and the trusted once.
Day 19 – Update your email address with financial institutions.
Update your valid email id with all the financial institutions you are associated with. For example your broker – your email id should be updated with your broker so they can provide timely information that impacts your financials. Take an example of the delisting of security. You miss to read the notice and the time frame to tender the shares has passed, you might incur a loss..
Day 20 – Nominee.
Make sure you have updated your Nominee at all places.
This is a must thing you should do.
Never avoid it.
Day 21 – Prepare a road map to repay your debt.
Repay your debt as soon as you can.
Start with Credit cards. Repay credit card debt first.
Once done, repay your personal loans and car loans.
After this move on to repay your home loans.
Go in this order.
Never accumulate credit card debt ever.
Day 22 – Understand Credit cards.
The credit card should only be used for convenience and for reward points. Never use a credit card to spend more than you can afford.
Your credit limit should not be more than your monthly salary.
And if you don’t need a credit card get it canceled now.
Day 23 – Discuss financials with your family.
Involve your family in financial plannings. ask them for goals and suggestions.
Especially kids teach them about compounding and savings.
I take consent from my whole family before taking any financial decision.
Day 24 – Create a master financial document or file.
This should serve as your complete portfolio of all your investments and investment-related documents all in one place.
Keep a photocopy for your reference.
Day 25 – Create a Will.
Will is an important financial document and is recommended for everyone to create a will.
Consult your lawyer for more details.
Day 26 – Ask your boss for a raise or switch your job if you think you can earn more.
If your boss doesn’t give you the raise you want to k for a more promising job which pays you well.
Also, as we previously discussed never depend on a single source of income.
Have a side hustle in place.
Day 27 – Opt for Low brokerage accounts and Invest in Direct Mutual funds.
A lot of low and no brokerage accounts are available these days for investing in stocks. Zerodha, 5paisa, etc. A lot of them are there.
Choose the one which best suits your need.
Invest in direct mutual funds. You will save a lot of money on the expense ratio. Don’t trust me? Check for yourself!
Day 28 – Do an investment audit.
Check expense ratios of mutual funds, your returns, your tax’s often so that you are in control of your financials.
Use portfolio management apps to keep a track of your investments.
Day 29 – If your Saving account balance is > then your personal loan – repay the loan.
Avoid debt at all costs.
Day 30 – Check
First of all, thank you for staying with me for so long.
Let’s now track your expenses and find out where you can save and how much you can save.
There might be a few things I would have missed out but this article is just for educational purposes. Do not take a financial decision based on this.
I have tried to cover various parameters relating to investing and savings.
Consult your financial advisor before making a financial decision. You must discuss these points with him as well.
Let me know if I could have included something here by commenting below.