What is your resolution for New Year? Look around and you would see that people have made resolutions mostly related to health and well being. When it comes to money, their resolution is either to earn more, payoff their debt, or are too arbitrary that you cannot define any structure around them.  When it comes to basic financial planning most of the people have a no idea on how to handle their finances. Just like small savings results in big corpus, in same way decision taken this year has a long lasting impact on your finances in years to come.

The most important part of any resolution is to give structure to it. Telling yourself that I would save money this year would not help you at all. Put some figure around it. Tell yourself that I would save $200 every month or put 20% of saving in my separate account. On other front you can put some numbers around the debt you want to get rid off and credit cards you want to close in order to control your spending. Having a basic financial plan is first step towards a sane future which is tension free and gives you a comfort and confidence in terms of Money.

There are 5 Basic Financial Planning resolutions that you can keep for this year. They are all interrelated and promotes each other.

1) Formulate Goals- Each one of us have Goals that need a financial plan around it. Studies, marriage, new car or own house are some of goals that are prominent ones. Just having a wish list is not enough; you also need to find a path that would lead towards your goals. Determining the amount of money you need for your goals and formulating a saving strategy for each month is a good first step that can lead you towards your goal.

2) Check Spending- Do you go for impulsive purchases? Do you spend money and then regret later? Do you spend money in depreciating assets rather than appreciating? Do you splurge? These and many other questions are important for you to do an introspection and put a stop on unnecessary spending. Remember, Money saved is money earned. The more you save the more you earn indirectly because the money stays with you and is available to be used in other important work.

3) Increase Savings- Every penny that comes goes away in things that we cannot even anticipate. This happens with each one of us. No matter how much is our salary or how much increment we get, our financial situation is same every year. This jinx needs to be broken and we need to save for the rainy days. Small steps this year goes a long way in building a sane saving habit. The saving needs to be separated from normal stream of spending and we should pledge not to touch it for anything except emergencies.

4) Invest not Gamble- Investment is important to make your money work as hard as you work for it. The dollar saved today would not be of same value in 10 years from now. Things which you can purchase from one dollar today would get more expensive in years to come because of inflation. It is important you invest your money so that it grows more than the value it would lose in coming years. Also we need to make distinction between investment and gambling. Get rich quick attitude hurt us more than helping us with money. Investment needs time to mature and we need to be patient with it.

5) Upgrade Knowledge- Having knowledge about everything that relate with money is first step towards financial independence. Yes, you cannot know everything beforehand and there should be start somewhere. Making decisions on what our financial planner or friends told us without a full knowledge of it is often dangerous. It is important to study where we are going to invest money and the intricacies involved in our investment decision. Internet is a good source to study reviews and remove a biased approach from our decisions.

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If five goals seem so overwhelming then stick to one or two. If you don’t have much for anything then it makes sense to start upgrading your knowledge. We work so hard to earn money then why not work hard to preserve it too. Idle cash in bank is a bad decision just like not having cash in hand at all. Pick up a basic financial planning resolution for this year, it will help you a lot in long run.

Photo Credit-  B Rosen

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