Each time you make a purchase, and get a notification mentioning your bank balance, do you look at it or do you believe ignorance is bliss? Does knowing how much you overspent scare you into simply ignoring the financial damage you’re incurring? I don’t want to be the bearer of bad news but this behaviour is everything contrary to adulting—and in 2022, we have to change that.
Your financial security is much more important than the impulsive buying or spending you may do because you’re feeling happy. So what do we do? We look at the new year as a clean slate and make sure that we prioritise our financial security and freedom while living a balanced life.
Here are a few tips you can add to your finance checklist so you can up your financial wellbeing in 2022.
1) Automate your finances
Meghna Jaisingh, a chartered accountant and financial advisor, says the best thing to do for your finances is to automate your bills. “It feels like a lot of commitment for many individuals somehow but when all your bills are paid off, you will get a good idea of how much money you have left for variables. This will also help you not incur any late payment fee,” Jaisingh explains.
2) Increase your financial knowledge
Don’t turn your head away from reading up on finance, starting 2022. Whether you find it interesting or not, this is the knowledge that will help you. “Read more about finance. Get a financial advisor. Ask your friends about policies and plans. And then zero in on the ones that meet your financial goals. If you haven’t started investing yet, start small and slow, but do it,” Jaisingh explains.
Even if you are investing, there is no harm in increasing your financial knowledge by learning about budgeting, saving, and investment tips.
3) Identify your worst financial nemesis
What is your worst spending habit? In my case, my money used to be either on my plate or in my closet. It may seem like all the self-care you need, but guess what is actually caring for yourself? Making yourself financially stable. “Find out your worst spending habit and tackle it with full passion the coming year. Make a budget and stick to it. Prioritise investment, savings and bill payments. And then keep a sum for your favourite indulgences,” Jaisingh advises.
4) Start an emergency fund and a retirement fund
You’re not invincible and in case of an emergency, borrowing money will only lead to debt and interest. So start an emergency fund as soon as possible. “Having an emergency fund will stop you from dipping into the savings you’ve been doing for other goals (I hope you are!) It leaves you secure so you don’t go broke or have to seek lenders in unforeseen circumstances. Also, start a retirement fund while you’re young,” Jaisingh points out.
5) Clear your debt, if any
If you have an EMI, credit card bills or any amount you borrowed from a personal bank, do your best to clear it. “We end up paying much more in interest when we borrow money, be it from an institution or an individual. Fast-track the repayment of your loan. To do so, alter your lifestyle, your spending habits and your budget accordingly,” Jaisingh explains. “In the worst-case scenario, you can take a low-interest loan to repay a high-interest one and then work with that. But don’t take it for granted,” Jaisingh says.
6) Have a Fixed Deposit but do not park all your money in it
Jaisingh explains that while Fixed Deposits are low return investments, parking all your money in it may help you save but not help you in wealth creation. She advises diversifying your investment portfolio in 2022, so you can earn better returns.
7) Be cautious when opting for ‘Pay now, buy later’ schemes
“BNPL schemes find their main target in cash-strapped youngsters who may not have enough money to pay upfront for an emergency buy,” Jaisingh informs. However, it is easier to incur bad debt, with such schemes, diminishing your financial security. “If you’re incurring interest and late fee to buy a luxury watch, it is a bad debt because the investment is not giving you any returns,” Jaisingh explains.
Also Read: Systematic Investment Plan (SIP) Guide For Beginners