16 ways to stay fiscally fit in 2016

So here we are, in the first Monday of 2016. Time to look ahead, learn from the hits and misses of the year gone by, make new plans and so on. However, when it comes to financial resolutions, making *and* sticking with them never seems to happen. We always end the year realising how little was actually accomplished, and then joke about it saying “resolutions are meant to be broken” :p

Jokes apart, each year that passes by without sticking to these resolutions is going to put you into a financial sink hole. However, the fact that resolutions are rarely adhered to shouldn’t discourage you from making new ones (and hopefully) sticking with them.

So without much ado, here’s a handy list of 16 ways to get fiscally fit in 2016:

1. Save more

Saving more seems like a very easy thing to do, but at the end of every month, we’re always fighting a losing battle when we total up the credits and debits. Decide how much you’d like to save every month, and how you’d like to allocate it. As far as possible, ensure this is automated so you’re not tempted to vary the saving. This could be in a fixed deposit, an SIP in a mutual fund or a transfer to another bank account that you keep only for savings.

2. Make a budget and stick to it

Making a budget often seems to terrify people and they keep putting it off. Start by putting together whatever recent bills you have, along with your bank and credit card statements. Once you get this information for the past 3–4 months, you will see where and how much you spent, and a pattern to your expenses — which are recurring every month/quarter, which are one-time and so on, based on which can make a budget for your monthly spend. Compare this with your income from all sources for the same period.

This will give you a snapshot of your income v/s expenses, allowing you to see whether you’re spending less / more than you’re earning. Thereafter, every month, compare your monthly spends to your budget to ensure you’re sticking to it. One of the simplest ways to make a budget is to use a template within apps like Microsoft Excel, which have inbuilt formulas. Once you’re comfortable with it, you can move on to managing your budget using mobile apps like Walnut.

3. Avoid revolving credit

Revolving dues on your credit card is a strict no-no and should be avoided to whatever extent possible. Do read our previous post about the pitfalls of revolving credit.

4. Create an Emergency Fund

Life is full of unexpected events, and some extra money is always handy in case of sudden accidents or illness, natural disasters or calamities, loss of job, some family emergency and so on. The size of an emergency fund would vary depending on your needs, but is typically worth 6–8 months of living expenses which should help you see through the crisis. Ensure that this fund allows quick liquidity and is easily accessible to you and immediate family.

5. Pay all bills on time

This one is actually a no-brainer, but it is amazing how often people become lazy and pay bills late, whether utility bills or credit card bills. Not only do you end up risking termination of those utility services, but you end up paying a bomb in interest and late payment charges, besides leading to an adverse credit rating.

You can track all your pending bills without any user input. See where your money goes, split and settle expenses with your friends over chat, get timely reminders for bills and tax payment — all this is auto-magically possible with Walnut. Never miss a credit card or utility bill / tax payment again!

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6. Get your CIBIL Score

Speaking of credit rating, do you know what your CIBIL score is? In a recently conducted poll of app users, an overwhelming percentage were unaware of this, and a significant number thought querying one’s CIBIL score led to a dip in rating. It doesn’t, and it always good to be aware of it should there be a requirement for any kind of loan.

7. Clear high-interest debt

Make a list of all your high interest debt — personal loans, credit card dues — see which one carries the highest interest rate. Aim to clear that first, and work your way downwards. A couple of suggestions on how to do this — say you have 4 credit cards. Allocate a higher than usual amount for paying off dues on the one with highest interest. Pay only the minimum amount due on the other cards. Once card #1 is debt-free, apply the same principle to the other cards till all outstanding dues are clear.

While you’re doing this, keep credit card usage to a minimum or use the one with the lowest credit limit / interest rate. Another way is to avail of a ‘Balance Transfer’ option if your card issuer allows it. This transfers debt from the higher interest card to your other card at a lower rate for a fixed duration.

8. Get FATCA compliant

If you’re a mutual fund investor, you have to be compliant with FATCA if you wish to continue investing in mutual funds in 2016. This is a 5 minute process and can be completed online itself.

9. Get insurance

Are you single with no dependents? Or married, with dependents, as well as other financial liabilities? In either case, life and health insurance is a must, not only to guard against mishaps and risks to your health and life, but also to ensure that illness/accidents don’t eat into your savings and destroy the financial well-being of your next of kin.

10. Safeguard your passwords and PINs

We are living in a world where most things are now done online with a few clicks / taps — whether making purchases, paying bills, transferring funds and so on. Predictably, the number of online frauds has also been on the rise, and being careless with your account credentials can leave the door open for someone to create havoc with your finances.

It is imperative that you select strong passwords and PINs for your bank, credit card and investment accounts, and stay alert for any untoward or suspicious activity. Also ensure you change these at regular intervals.

Now, track your expenses and pending bills without any user input. See where your money goes, split and settle expenses with your friends over chat, get timely reminders for bills and tax payment — all this is auto-magically possible with Walnut. Never miss a credit card or utility bill / tax payment again!

11. Diversify your investments

There is a saying “Never put all your eggs in one basket”. Uncertainty abounds at every step and if you’re not careful, your savings can go up in smoke / lose their value over time due to unforeseen conditions or market conditions. Once you determine your appetite for risk, always spread your investments across multiple avenues and asset classes, whether in bank deposits, equity / debt mutual fund, bonds, stock market, precious metals, real estate and so on. Ensure you track these investments so you can rebalance your portfolio as and when needed.

12. Pay your taxes and file your returns on time

The Income Tax department usually expects individuals to file their income tax by July every year, which leaves ample time to calculate your tax liability and submit your returns. Delay in filing leads to needless penalties. If you’re a freelancer or a self-employed professional, you need to pay taxes in advance every year. Don’t miss that advance tax deadline.

13. Documentation

Does your family know about your finances? Are they aware if you’re insured or if you have any legal issues? Can they access those documents? Many families have been at the receiving end when the main earning member(s) did not involve them in financial details and when he/she passed away suddenly, piecing together details of bank accounts, investments, insurance policies, real estate etc was a nightmare.

At least once a year, sit with your spouse / parents / next of kin and ensure they are kept up to date with all financial, health and legal documentation.

14. Nominate

When is the last time you updated nominees and beneficiaries of your banking and investment accounts? Nomination is often overlooked and can create needless hassles with red tape and paperwork in case of some untoward incident. Make a list of all your bank and investment accounts and add a nominee to avoid any inconvenience to your family if something happens to you.

15. Make a will

There is often a misconception that only old people need to make a will. Anybody who has dependents can make a will at any time, and should do so, besides reviewing it regularly. Doing so avoids confusion and ill will among descendants as well as long litigations. Making a will is also no longer as tedious as it used to be, and there are services that allow you to make a will online now.

Last but not the least, #16

Stay happy, healthy, take time out for your friends and family, go on that vacation you’ve been planning, take up a new hobby — and you’ll see yourself tackling the other 15 resolutions with greater vigour and enthusiasm.

Wish you and your loved ones a Happy New Year and look forward to seeing you fiscally fit in 2016! 😀

Originally published at www.getwalnut.com on January 4, 2016.