Well the new year has started, everybody is looking way to fulfill their resolutions with success. If you are still wondering what resolution to make this year, why not look at financial resolutions that can help improve your financial position? Here are some ideas to get you started:

Prioritizing goals

Without prioritizing your financial goals it is impossible for you to achieve those goals. Once you decide your financial goals, it is advisable to prioritize them in order of importance, such as children's education, followed by buying a new car, etc. One should then look at how much is required to achieve these goals and plan an investment strategy accordingly. This should be a realistic investment plan, with money being set aside each month for saving against the goals.

Analyze spending and earning

One should analyze spending patterns to observe how much is essential spends, and how much is luxury spends. Unless one's earnings are significant as compared to their debt level, and other commitments, it is best to put off luxury purchases for later and stick to the essential expenses. This will leave more money at the end of the month to save, invest, and repay any debt. Also, see if there are ways to reduce essential expenses, such as taking the office bus instead of driving to work, or buying a cheaper brand of coffee.

Keeping a strict budget

It is advisable to create a budget, which takes into account current expenses, and helps one save money. This budget needs to be realistic and take into account one's lifestyle and spending patterns. Following a strict budget will assist you in keeping to your financial goals.

Choose the time line

Fix a time line to achieve your goal, a long-term investment always reaps you the benefit of your money compounding. For example, let us assume you have a financial goal of reaching Rs 50 lakh as your target amount in 10 years, if rate of interest is 14%, then you need to invest Rs 18,853 every month to reach your financial goal. If on the other hand, the goal is to have a corpus of Rs 50 lakh to be reached in 15 years with the same % interest rate, then you need to invest only Rs 8,316 every month. This is because of the power of compounding, so the earlier one starts investing, the better.

Investment plans

It is also important to start to save simultaneously, and the best way to do this is to automatically transfer funds from your salary account into some form of investment- be it a recurring deposit, mutual fund, or fixed deposit. This will leave less temptation to spend, and will also help one build a nest egg for future contingencies.

The best option is to invest in mutual funds through a Systematic Investment Plan (SIP), since by investing via a SIP one gets benefits from both an up market as well as a down market. Also, try to choose investment options with respect to your goals, for example, if your goal is to send your child abroad for higher education, it is advisable to invest money in a Public Provident Fund (PPF) as it gives tax free fixed interest rate, principal security and income tax benefits under Section 80C.

Don't get addicted to credit card usage:

A credit card should be used only in emergency situations and not for all spending, instead of using a credit card for purchases switch to using a debit card as you can only pay based on how much is in the account and not more. Remember using a credit card can easily drive one into a debt trap, so be wary of high credit card usage. If one is using credit cards often, then one should ensure that the bill is paid in full to the credit card company each month to avoid attracting high interest rates.

Don't forget a contingency fund:

Try to save money in a contingency fund. This money should be used only in the case of emergency, for example one has been laid off and has to pay bills and rent, one can use the contingent fund money. This fund is will be maintained separately from savings, and should constitute at least 4 - 5 months of living expenses.

Summary:

> Fix your financial goals, and make investment plans accordingly keeping time frames in mind

> Make a budget and analyze spending patterns to ensure no overspending happens

> Invest in Mutual Fund through Systematic Investment Plan (SIP) scheme.

> Avoid using Credit Card and falling into a debt trap.

(Contributed by Anil Rego, CEO & founder, Right Horizons)