A date with your money this new year

It’s the time of the year when we review the year gone by. While most people think about their work or travels or significant life and family events, they forget one major thing – their money. However, it is worth reviewing your finances as they help you in having what you want.

To start off, create an inventory of your financial assets. This is a list of all bank accounts, lockers, investments, insurance, loans and credit cards. Get together all the bank account statements and other financial statements and check if they are all up to date. File all the statements.

Then, tally statements to check major expenses and areas where expenses can be reduced. These could be subscriptions that you are not using or simply lifestyle expenditure. Check for outstanding refunds. What you need to know is if you are able to follow a budget and save consistently.

If you do not have an emergency fund in place, it is a good time to start one. Invest 6 months of expenses in an ultra short term debt fund. You can do this with savings or reallocating other investments. Check if your insurance covers (both life and medical) are updated with the right nominees and more importantly enough for the family.

Now take stock of the performance of your investments and how these investments have helped you come closer to your financial goals. Do a relative comparison of investments that are underperforming. For example, you may be holding a smallcap fund. Instead of only considering an absolute return, compare the fund performance versus the smallcap category average.

More importantly, create a plan for 2020. If you haven’t got a financial plan created yet, it is certainly high time you sat down with a fee-only financial planner and worked on a plan.

You also need to think about what you want from your money going forward. Are you going to use it to pay off debt and live a better life or going to use it to generate an alternate income? Generally, one just takes it as it comes but it is important for you to have a more defined use of your funds. This will help you formulate your financial goals better and have a clear approach on how to achieve these goals.

Finally, have a quarterly money date. It does get cumbersome to manage all the paperwork at the end of the year and setting aside an hour a quarter is useful to verify all the statements of transactions for the correctness and to make sure there isn’t any unusual activity. This is all the more important with the number of digital frauds doubling. The money date can also be used to track expenses and have a course correction in case there are unexpected expenses or you haven’t been able to stick to the budget for whatever reason.

While the money date will give you more control over the way your finances are working, the bigger advantage is it helps to build the right money habits. Facing your finances regularly will stop you from irrational spending and make you focus on getting the best out of your money.

Wishing you a financially fullfilling 2020!