New year, new me. That is something that many of us have promise ourselves at the start of every year. I'll take care of my health; I'll lose weight; I'll eat less junk food; I'll spend more time with family - are just some of the resolutions people make. Being more prudent with money is also a resolution that people make.
To make 2020 (and possibly even the coming decades) financially sound, ET Online tells you about 20 financial resolutions you can make.
1. File your ITR on time
Penalties were introduced for late filing of income tax return (ITR) from FY2017-18. This year's ITR filing deadline was extended to August 31. For filing a belated ITR by December 31, 2019, you would have been penalised Rs 5,000. If you file between January 1 and March 31 of the new year, you end up paying Rs 10,000. So, if you did not file your return on time last year, make sure you do it on time in 2020 to avoid that hefty late filing fee.
2. Don't wait until the last minute to make your tax-saving investments
Keeping anything till the last minute is never a good idea, especially when it comes to money matter. Making your tax-saving investments in the last minute can have long lasting negative implications. Just to save tax, you might end up investing in the wrong instrument. There can also be technical problems as well. Let us say you waited till just a day before the deadline, i.e., March 31. What if your cheque is not cleared on time or gets rejected? You will not be able to do anything then.
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3. Keep an eye on your investments and all related things
From your stock broker to your fund house and manager, keep checking in on your investments and the people handling them. Nobody wants to be stuck like a DFHL or a Karvy like scenario.
4. Don't give in to market fluctuations
Your investments must be primarily determined by your financial goals and not by the equity market being on a high or low. By virtue of their nature, markets will face crests and troughs at various points. What you must not give into are knee-jerk reactions. Stay put, only be guided by your financial plan and goals.
5. Don't rely just on your employer's health cover
Many make the mistake of doing this. This is a mistake because when you leave your job you are no more covered until you join the next employer. Your health insurance policy terminates as soon as you leave your employer. Apart from this, you must also know that the cover may not be sufficient for you and your family. So you should at least buy a simple health insurance plan. This will give you the required cushion where you can also maximise your tax savings by claiming premiums (subject to a limit) as deductions under section 80D of the Income Tax Act.
6. Watch how you drive
After the motor vehicles Act came into force from September 1, 2019. Breaking traffic rules can cost you dear. However, did you know that these violations can impact the premium on your motor insurance cover? That is right, the insurance regulator has proposed to introduce telematics for motor insurance. Telematics is a method of monitoring your vehicle using a GPS device fitted in your vehicle, which will track data related to your driving habits, to which your personalised motor insurance premium will be linked.
7. Be careful while buying insurance from a bank
Banks generally have tie-ups with insurance companies. These agents try and push products to existing bank customers. Due to this cross-selling, many times, banks sell insurance plans to customers without telling them about the details of product. This is where most of the mis-selling happens. Most often these products are sold as an investment product promising high returns.
Therefore, as a customer it is your duty to be cautious while buying insurance from a bank. Insurance is not an investment product and hence, blindly buying insurance policies in the name of investment will not fulfil your future financial goals. Moreover, terminating these policies prematurely can lead to huge losses.
8. Beware of and beat the fraudsters at their own game
When you use credit cards, digital wallets, phone banking, there is always window for fraudsters to steal your money. Stay ahead of them. Review your bank and other online accounts regularly. Check your phone banking or wallet alerts for transactions and keep an eye out for those you didn't make.
9. Put a little more effort into your passwords
Make it a rule to not set passwords that are easy to crack. Things like 'iloveyou', 'password123' etc will just not make the cut. In this case, the more complicated, the better.
10. Handle those social media handles carefully
With a lot of us taking the digital route for even the smallest of tasks, it comes as no surprise that social media has become a fishing pool for fraudsters. Many fake handles surfaced in 2019. For instance, a few posed as NPCI-BHIM's official handle. Then there were fake websites, like the counterfeit IRDAI portal www.irdaionline.org and a bunch of fake RBI websites. Get the correct handles by visiting official websites or better yet, by call the customer care number.
11. Close inactive bank accounts
If there are bank account/s not being used by you and just lying dormant, close these. By not doing so, you might be penalised. Also remember, if the only transaction in an account is the periodic credit of interest on the existing balance, such accounts will be treated as dormant.
12. Safeguard your banking transactions
Do not opt for saving of password option prompted by the browser while accessing Internet banking. Beware of malicious sites and apps while accessing Net banking or downloading Net banking apps.
13. Don't keep all your money in just one bank account
If there's one thing that the unfortunate episode of PMC Bank has taught us, it's that you should not put all your money into one bank account. Urban co-operative banks especially are not well-regulated. Definitely don't fall prey to the higher returns offered. Also, each bank account has its deposits insured up to Rs 1 lakh under the DICGC. So you'll be able to make full use of this option when you spread deposits across banks.
14. Stick to the 50/30/20 rule of financial planning
According to this to this thumb rule, 50 percent of the earnings after tax should be used towards necessities, 30 percent of the money should be spent on luxuries or wants / desires and 20 percent money should be saved and invested towards your financial goals. This thumb rule supplemented with a solid financial plan can take your finances places and make your financial journey smooth.
15. Keep your credit profile clean
It's not just your credit score but your overall credit profile matters too when looking for loans. Don't rely heavily on your credit cards for borrowing, these are in fact the most expensive form of debt. Exhausting your credit limit regularly will hit your profile too. Make sure that your utilisation never exceeds 40 percent of total the credit limit available.
16. The more, the merrier
It is actually a myth that too many credit cards just complicate your finances. Get credit cards from 3-4 different issuers so that you are eligible for all the discounts being offered by various merchant outlets.
17. Avoid using credit card to withdraw cash
Lenders charge a cash advance fee of up to 3.5 per cent on the amount of your ATM withdrawals. Plus, these also attract interest charges right from the day of the transaction till the date of its repayment. You do not get any credit-free period to make interest free re-payments of the same.
18. Do not fall prey to festive season sale tactics
No cost EMIs, cashbacks, first-time user discounts, there are so many festive or now even non-festive offers throughout the year. Make it a point to set aside a certain amount for your discretionary expenses for the year and stick to that. Go only by your needs and don't be blinded by discounts.
19. Diversify but don't over-diversify
Investors think that the way to achieve diversification is to invest in many mutual fund schemes. However, the truth is that no additional diversification is provided by investing in more funds beyond a point. Remember, stocks held by similar funds tend to be a similar set and will be similarly impacted by market movements.
20. Personalise, plan and prepare
Make your financial plan according to your goals, risk appetite and horizon. Do not go by hearsay. Do your research about investment avenues, market movements thoroughly. Consulting a financial planner is a great idea. Finally, keep aside enough corpus for emergencies. There might be unforeseen events along your journey. Wealth managers normally advocate that the size of emergency fund should be about six months of a family's monthly expenses.
