8 Golden Financial Resolutions Take For Wealth Creation

A new year brings in new hopes and aspirations. Most of us commence the year with health and career resolutions, but we forget our financial health. So it's necessary to modify your budgets, increase savings and introduce new habits that will not only secure your finances but also expand your wealth.Here are eight golden financial resolutions that you must take for wealth creation:

1. Avoid borrowing to increase your liquidity Borrowing might seem the quickest option for your desired big-ticket expenses. But you will have to dip into your savings to pay the high-interest rate levied on loans. This vicious cycle is bound to create a financial burden for you. Savings take time to yield returns, but the accumulated sum provides satisfaction and is better than the lender's interest rate looming over you.
2. Make a budget to understand your finances It's advisable not to follow the 'income meets expenses' outlook as you will never be able to develop a budget and save money for your future goals and unforeseen expenses. Chart your monthly budget of income, expenditure and savings. A formulated budget will help you gauge your financial capability to save and invest more.
3. Do not procrastinate making investments As mentioned above, you should avoid your expenses to be solely dependent on your income. Besides, you may be focused on fulfilling immediate requirements and delay purchasing investments. But it's prudent not to procrastinate and invest now. Start investing early to generate larger corpus and compounding interest over a longer duration.
4. Go for goal-specific investments Lack of financial goals will not motivate you to invest, and you will end up having negligible savings. Also, instead of making blind investments, first, define a goal and choose an investment according to the corpus needed, the timeline and your risk capability. For instance, if your child's education is the goal, start early and pick an equity mutual fund to benefit from long-investment returns.
5. Don't assume immediate results Long-term goals such as a child's education, retirement and buying a house require a larger corpus which can only be achieved over a longer duration of the meticulous investment. Invest wisely in a Systematic Investment (SIP) plan that ensures stringent monthly saving as well as rupee cost averaging and yields more substantial compounding interest.
6. Stay unaffected by market fluctuations The equity market is transient and is bound to experience highs and lows. As an investor, you shouldn't make impulsive decisions based on market fluctuations. Instead, stay unaffected by the vagaries of the market and focus only on your financial goal.
7. Avoid over-diversification of portfolio As an investor, you may be tempted to diversify your portfolio by purchasing multiple mutual funds. But gradually it becomes difficult to manage over-diversification. Besides, you may not gain from diversification as similar funds usually have related stocks that experience a common impact of market fluctuations. Instead, maintain a less diversified portfolio for more relaxed focus.
8. Keep a contingency fund It is financially prudent to always have a contingency fund for unforeseen expenses. Job loss, medical crisis or natural disasters can severely affect your finances. Allocating savings towards an emergency fund will prepare you to sustain life’s adversities.

In Conclusion To conclude, do not set over-ambitious financial goals or go beyond your risk appetite. Take the sound advice of a financial advisor to understand the equity market and make appropriate investments. These eight financial resolutions will guide you in your financial planning and wealth creation . Remember to keep a checklist of your resolutions to track your progress throughout the year.

The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.