Mid-Year Review of Your Financial Plan

Six months have gone by in a jiffy in 2016. Most of us made some financial resolutions in a bid to board the train to financial wellness at the start of the year. However, such resolutions usually get derailed quite soon. Let’s review these financial resolutions mid year to ensure that the train stays on the right track:

1. Tracking the Spends – An individual can easily recognise their spending pattern if they keep track of spends. While some spends are basic necessities of life like roti, kapda aur makaan, discretionary spends can indeed be controlled by exercising financial wisdom. If you have stuck to this resolution since the beginning of the year, you must have saved money. But if you couldn’t take the first step, it is time to get Money View App on your phone. It will help by tracking all the expenses from SMS notifications and helping generate handy reports to detect your spending patterns.
2. Save first, Spend Later – India is a country where expenses are prioritised before savings and people generally tend to save only if anything is left after our monthly expenses. Rather, the right approach is to commit a minimum percentage towards savings and then allocating the balance income towards our monthly expenses. As it is said, little drops make a mighty oceon, you will be pleasantly surprised on the effect these small savings have on your investment corpus if you have stuck on with this financial resolution. However, even if you haven’t yet started your incremental savings, you may budget a part of your income to be saved and invested. It is never too late to start saving.
3. Diversification of the Investment Basket – In the beginning of the year, it was suggested to not put all your eggs in one basket and invest in varied instruments like FDs, MF, life insurance, emergency fund etc. The investment portfolio must be a balance between the risk and returns. No asset class, including stocks, have consistently delivered positive returns always. While you must have indeed started off with investing into instruments with different risk and reward profile, it is even more important to continue with investing consistently in a suitable mix of investments and constantly monitor what works and what does not.
4. Limiting Credit Card Use – Credit cards are generally seen as a financing instrument in India to spend for expenses to pay later. With a pre-sanctioned limit with normally zero collateral security, it allows access to more funds than what our earnings give us. While this can be a positive factor in the case of emergencies, spending more than what you can repay immediately is always dangerous. Reducing credit card usage indeed helps in having control over our budgeted expenses. Even though you are happy using credit cards for the rewards and cashbacks they offer, one must make sure that the expenses being incurred are duly budgeted for. A wise tip to reduce credit card usage is to get the credit limit reduced for a limit equal to your monthly expenses budget.
5. Investing in Knowledge – On Day 1 of the year, we had resolved that we shall start reading financial news through newspapers, websites, blogs etc. While there is no doubt that you are keeping this resolution by reading this blog, it is imperative to continue with this good habit. This helps you to make informed decisions about money and investments.

When Neil Armstrong stepped on the moon, he said, “That’s one small step for man, one giant leap for mankind.” Similarly, if you keep your financial resolutions and take these small steps, there will be a giant leap for your financial wealth.

Don’t fret if you have slipped up. It’s never too late to make amends or begin on good habits. Here’s to financial fitness for the rest of the year.

Simardeep Singh is a Chartered Accountant based in Delhi. He loves sharing his knowledge about personal finance and investment. He blogs regularly at  www.simardeep.com.