Resolution for New Year: Save more, Spend Digitally & Invest In Growth Assets!

This year was quite eventful on domestic as well as international front. In 2016 we have witnessed many unexpected events. This year will be known as the year of Amma, Trump and Modi or in short it will be remembered as the year of ATM. Now when we are entering in 2017, as always every New Year brings with it a new start, a reason to begin again, a time when we promise ourselves to do something different. That's why we make resolutions. We all care about our money after all we spend a significant portion of our life, and a considerable amount of efforts and resources to earn it. So it makes sense to make some resolutions on our financial life as well!

As a rational investor we should keep the following factors in mind before making any financial decisions in the year to come:

1. Save more money

Saving can be viewed as the practice of paying oneself first this money is used for our future needs like marriage/education of children and our own retirement etc. Most people save money, but how much remains an individual choice. We must draw a plan for our financial needs and figure out exactly how much we want to save and how it will be allocated on different kind of savings (cash, equity, gold, etc.). Many tools are available online and for proper planning an expert’s advice should be taken.

2. Spend less cash/ Use Technology

This year we have learn that cash can also be risky investment. So let’s have a digital wallet - We are moving towards the digital era from smart tv, smart watches, smart phones to now smart wallets lets be part of the cashless economy. The next phase is the digital economy. We should keep an eye on upcoming technology which is set to change the face of the financial world. A digital wallet is a necessity, not merely a luxury. It can be net banking on your smart phone. Debit/credit cards or services like PayTM we should learn the new things so as to live comfortably in changing time

3. Start a budget

Budget is very important to have a disciplined financial life. We should create our own budget which will meet your financial needs without stressing your income level. There are many tools/apps available in the market which can guide on spending and investment.

4. Invest Smartly

We should not just save but the money saved should be invested smartly so that it can give good and tax efficient return. We should invest in those assets which have high growth potential. Growth assets are typically those assets that have the potential to give capital appreciation over the long term, as against generating current income. Examples are equity shares, equity mutual funds, real estate etc. These assets help in building wealth. Generally a balance of income assets and growth assets would be required for an investor at any life stage, but the asset allocation will differ. The role of proper asset allocation for achieving investment success is very important, so avail of some of the many tools online or take the help of an expert to get the right mix of assets class. Here are some quick rules of thumb:

5. Mapping Investments with Goals

Financial Goals	Types of Asset Class
SHORT- TERM GOAL (1-5 YEARS)
Buying a Car	Debt & Money Market
Foreign Vacation	Debt & Balanced funds
MEDIUM TERM GOAL (5-15 YEARS)
Buying a House	Balanced & Equities / Diversified Mutual Funds and move to Debt and Cash when goal is nearby
Child's Education	Equities / Diversified Mutual Funds and move to Debt and Cash when goal is nearby
Child's Marriage	Equities Diversified Mutual Funds & Gold and move to Debt and Cash when goal is nearby
LONG TERM GOAL ( 15 YEARS +)
Retirement	Equities / Diversified Mutual Funds and move to Debt and Cash when goal is nearby
Wealth Creation	Equities / Diversified Mutual Funds & Real Estate
Inheritance	Equities / Diversified Mutual Funds & Real Estate

The chart given above is for illustrated purpose only, while choosing the asset class the actual time from and risk appetite is major factor. How long a person can let his/her investments compound is a major factor in determining how large they grow. So it's good to follow the old thumb rule that says INVEST AS EARLY AS POSSIBLE, AS OFTEN AS POSSIBLE...AND AS MUCH AS POSSIBLE!

And Finally…

Much like India's freedom struggle, achieving financial independence is also a slow process and one cannot hope to reach it overnight, over a few weeks or even a few months. However, every step taken in that direction will bring us closer to our goals. As always, before making any investment decisions please consult your financial advisor.

On the threshold of the New Year, we wish that 2017 brings you the needed discipline for a happy financial life!