Update on: January 1, 2022 | 02:07 PM IST

The New Year is just around the corner. It’s a good time to review your financial matters. Let’s make some key resolutions for 2022 for a healthy financial life.

1. UNDERSTAND THE PANDEMIC’S IMPACT AND MAKE DECISIONS

A good plan ideally starts off with a past review. “Spend 75 percent of your time reviewing the pandemic years 2020 and 2021,” says Rishabh Parakh, a chartered accountant and founder of NRP Capitals.

Ask yourself: did your expenses shoot up, did you achieve your financial goals? Assess the impact of the COVID-19 pandemic on your income and expenses. This will help you set realistic financial resolutions that are achievable during the year.

2. CONSOLIDATE YOUR PORTFOLIO

Many of us bought a lot of stocks and also cryptocurrencies in the past two years. There were several new fund offers (NFOs) and initial public offerings (IPOs) in 2021. Mrin Agarwal, Financial Educator, Money Mentor and Founder of Finsafe India suggests de-cluttering your portfolio. “Simplify your finances to review your portfolio periodically,” she says, nudging us to sell assets that we do not understand and may have just bought because everyone else around did. And bring down the number of holdings in your portfolio. “A simplified investment portfolio also eases the tax-filing process at the end-of-year,” she says.

“Make a resolution to consult your financial advisor before investing in new thematic offerings from AMCs or over-valued IPOs. Avoid following the herd blindly for quick gains as it’s risky,” says Paddy Raghavan, Co-founder of Multipl.

There are expectations that investing in cryptocurrencies will be regularised in the year 2022. “You should monitor this news development and invest only up to 5 percent of your overall investment portfolio in cryptocurrencies,” says Parakh. He adds that retail investors should deploy only the amount that they can afford to lose. You must avoid gambling while investing in cryptocurrencies.

3. BUY HEALTH INSURANCE

COVID-19 is still around us. “Most people have been relying only on the group insurance from their employer. They need to reassess whether existing their health insurance is currently sufficient for the family and dependents,” says Raj Khosla, founder and MD of MyMoneyMantra. Similarly, evaluate whether you have sufficient term insurance coverage for uncertainty in this pandemic period.

You must have at least three months of cash reserve on hand as fixed deposits or liquid funds for an emergency.

4. KEEP ONE DAY A MONTH JUST FOR YOUR FINANCES

From monitoring your investments and deploying surplus amounts to accounting for your expenses, and checking your credit report, your money box requires your periodic attention. Keep a day aside from your schedule for your money box. “Jot down all the financial tasks in a diary/excel worksheet,” says Parakh. This way, you will have a focused approach and the chances of your money box getting neglected go down.

Close scrutiny helps uncover gaps. “Spend some time to understand your bank statement and credit card statement in a month. Analyze your expenses and bank charges. If something is not right then seek help from your bank,” says Aparna Ramachandra, Founder Director of rectifycredit.com. Become a more informed and financially agile person with such exercise.

5. PLAN, SAVE AND THEN SPEND

Identify big-ticket spending and make a resolution to save for it from January onwards. “Plan ahead and avoid impulsive decisions to buy them on credit,” says Raghavan.

For instance, spending like holidays, insurance premiums, school fees, gadgets, home interiors…all these high-ticket items should be planned ahead, “to avoid paying them by personal loans later,” adds Raghavan. Many shops use Buy Now, Pay Later (BNPL) schemes and travel using Holiday Now, Pay Later schemes. Make a resolution this year to avoid those.

If you had taken a loan moratorium in the year 2020 and now your cash flow allows you to prepay part of this loan, then make a resolution to reduce this debt without affecting other financial goals.

6. TRANSFER THE HOME LOAN ACCOUNT

There are several home loan borrowers paying the home loan at old interest rates, which was around 10.5 percent whereas now it’s available at less than 7 percent interest rates. “Make a resolution that in the initial months of 2022, will negotiate with an existing lender for lower home loan interest rates or will switch the lender,” says Ramachandra.

“In the year 2021, the focus of the banks was to attract balance transfer customers, and it’s expected to continue in 2022. They are coming with offers to target customers with good credit profiles of other banks into their own books,” says Atul Monga, Co-founder and CEO of BASIC Home Loan. For instance, Bajaj Housing Finance slashed home loan interest rates (including the balance transfer) to 6.65 percent p.a. as part of its new festive offer from December 28, 2021, to January 26, 2022.

If the new home loan offers are around 25-50 basis points cheaper than your current rate, there is no reason to delay home loan refinancing. “You should do your math and switch even if the difference is only 25-35 basis points,” says Vipul Patel, Founder of Mortgageworld, a loan consultancy firm. Anything above 25 basis points makes commercial sense with a long-term view. He adds that if your remaining loan tenor is 5-7 years, then it’s not beneficial to switch.

7. IMPROVE YOUR CREDIT SCORE AND REVIEW ANNUALLY

Make a resolution to monitor your credit report and credit score at least once a year. “If anything is wrong in your credit report, then rectify it with the bank or lender,” says Ramachandra. If you have multiple loans with three to five months, installments remaining, see if you can prepay and close the outstanding loan accounts, she adds. This will help to improve your credit score and you will be eligible for a higher loan at a competitive interest rate. Individuals having a score of 750 or more get the best credit terms.