Before the new year eve of 2016 sets-in, its time to make resolutions. Its only 55 days before 31-Dec. Lets take a pledge that this year we will do everything to improve our financial position. In this article we will see few easy ways of what to do with money. Idea will be to use money to improve our financial position this new year 2016.
We will present to you 8 ways of what to do with money. The points discussed here are in order in which they should be executed. Like, implementing point number 1 before 2 is important for long time success. We have loads of written material on internet about personal finance management. But do we follow those suggestions provided by them?
More often than not, the suggestions provided are either too complicated to or are too lengthy. Reading and implementation are only like distant expectation. People get bored by random suggestions and skip the article itself. But here we will present to you all suggestions in most logical order. You can easily choose to implement them in the order in which they are listed. Once all 8 steps are implemented, their financial position will improve for sure. Keep repeating all the steps every new year, and within 5-6 years you can expect to be far more FINANCIALLY INDEPENDENT.
What to do with money before 2016…
Prepare a Budget & Track Expense
This is the best thing one can do with money before spending. Preparing a budget gives a direction to our spending’s. Budget preparation triggers ones interest to track expenses. Once one starts tracking expense and does not overspend than budgeted, the journey towards good financial health start taking big leaps.
Prepay Loan with Annual Bonus
In this part of the world, employees receive bonus during festival seasons. Some might even receive performance bonus at the end of the year. From this year onward, instead of spending all the bonus on gifts and vacation, use 50% to make the prepayment of loans.
Calculate Income Tax Liability
This year do not depend on your employee to plan your tax outgo. Instead you do your calculations yourself. List down all existing savings that qualify for income tax deductions (including home loan EMI). Calculate your taxable income. If you find that your savings are not enough to utilize all tax reliefs provided by the government, take steps to use them this new year.
Take Steps to Decrease Your Fixed Bills
Reduce electricity bill by switching to LED lamps. Change (reduce) your internet broadband plan if you see that you are not using it to fullest every month. Unsubscribe to those DTH channels that you never see on TV. Make a prepayment of your loan and reduce the EMI. Change the mobile phone-plan and see if you can reduce at least couple of dollars each month.
Prepare a Balanced Investment Portfolio
Include stocks, mutual funds, gold, bank deposits etc in your investment portfolio. If possible try to buy one invest (different) every month. If you have spare-funds make sure to include real estate property in portfolio. If funds are not sufficient, buy REITS. If you already have a investment portfolio, make sure to review them and sell anything which is not performing. Also make a sure to books profits on investment which has achieved its goal.
Increase Contribution to Retirement Savings
People often ponder about what to do with money in this new year. My favorite and evergreen answer is related to retirement savings. Increasing contribution to retirement savings plan is the best. Alternatively you can decide to prepay loans, invest money in mutual funds, buy precious metal etc. But for me increasing contribution to retirement savings is top priority.
Buy a Monthly Income Plan (MIP)
Monthly income plans (MIP) asks one to invest now. The contribution to MIP should continue for next few years (say 10 years). From the 11th year the monthly income will start getting generated. Both psychologically & practically, a MIP does a world of good to the investor. Not only he is able to save money in short term, but also in long term, he/she is able to generate an assured side-income. This again adds to ones financial independence.
Buy Life Insurance & Health Insurance
Make sure to include life insurance and health insurance policy in your investment portfolio. Not only they can save you income tax but also forms a part of your emergency savings. Initially it may look like an unnecessary cost but in time to come they will prove more than useful. As people starts getting older, it is observed that psychological effect of such insurance policies are very positive on the insurer.
Before we start to do anything with money it essential to first prepare a budget. Here we must not only budget the expense but also savings and investment. Any financially aware person does not spends a dime without budgeting. All the money that is coming in pocket shall be used in such a way that it improves ones financial position. It is true that we cannot use 100% income for only savings and investment. So it is essential to budget a fixed percentage of ones income to manage day-to-day needs and balance to be used for savings & investment. As a rule of thum, if a person can save 30% of ones annual income, it is considered very good.