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Five ways to manage your money in 2005

By Sudhanshu N
Last updated on: December 28, 2004 16:47 IST
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Five ways to manage your money in 2005

M aking New Year resolutions is a piece of cake, especially if it is followed by a nice swig of the spirits.

Sure, you will decide to lose weight (or put some on). You will decide to be on time. You'll decide to be nicer.

But, in addition to the usual will-dos, remember to add these financial must-do's.

If you push them aside, you'll find there are no rescuers in the vicinity when you are in financial distress.

So, make these resolutions NOW!

1. I will harness technology

Do yourself a favour and hop on to the technology bandwagon. Not comfortable with leaps in cyberspace? Fine. Begin the process with baby steps.

Do your utility payments (electricity, rent, telephone), credit card management and securities broking (buying and selling of shares) on the Internet. Believe me, e-management will help you save time!

Today, except for check deposits and cash withdrawals, almost any financial transaction or bank activity you carry out in person can done online. Besides, your online bank is never closed!

Wave a cheerful goodbye to the long queue at your bank for the intra-account transfer you wanted; don't forget to cock a snook at that obnoxious cashier!

In order to start Net Banking, all you have to do is contact your bank. You'll get a PIN (personal identification number) and a password. Then, just go ahead and click away to find out what you need/ complete your banking transaction.

Ditto for your demat accounts -- you can check all the financial data in the comfort of your home. What's more, the service is open 24x7!

2. I will lose those debt-love handles!

You've piled it on -- now lose it!

It's time to get serious. All debt is not bad nor is it equal.

Your housing loan or education loan is a good debt -- it helps you achieve a goal. What you don't need is the personal loan you took on a wild impulse, to fly first class to Mauritius and back!

First, learn to differentiate between the two.

Good debt brings an asset that will appreciate -- your home for instance. Let it stay for some time.

Attack the others with a vengeance; start by zeroing down on the one with the highest rate!

The way out is to take a hard look at your finances and determine how much you can realistically afford to pay each month. Then, muster all your courage and funds and increase the monthly payments. In fact, double or triple them.

By paying a little more than the minimum each month, you'll accumulate less interest over time because you're steadily chipping away at the balance. You'll also pay off your debt faster.

Don't just halt there.

Go the whole hog -- skip those fancy dinners, coffees at neighbourhood Barista. After all, mom makes a pretty mean brew too. Why not sip that for a change and watch the debt fat melt?

3. I will organise my financial documentation.

Your finances are nothing but a bundle of legal and financial papers. Yet they are extremely crucial and their safety is paramount, both from the personal and the taxation angle.

Start by maintaining a list of your bank accounts, demat accounts, equity investments, fixed deposits, bonds, insurance policies, property papers, income tax returns, registrations of property/ car, safe deposit boxes, etc. Let a family member and/ or a close confidante know where it is kept.

Remember, any document relating to ownership should be kept as long as the item is owned.

With your documentation at your fingertips, you can save yourself from many tax and finance migraines!

4. I will supersize my money!

There are two fundamental rules for making big moolah.

Rule no 1: Earn more.

Rule no 2: Spend less.

To achieve Rule No 1, you could moonlight as whatever your heart desires on weekends and reap frugal rewards of toil. Or you could work smart and use the power of the stock market to make your money multiply faster.

The goal behind investing in the stock market is to use your money to make more money!

Before you do that, though, there is one thing you need to understand: investing is not gambling.

Start safe. Begin with companies you know and understand well. It may slow the pace of returns, but it will also ensure you aren't left with a broken heart and a bleeding bank balance!

5. Save! Save! Save!

Life has its own momentum and can sometimes throw you off-balance. Financial emergencies such as illnesses or the loss of job can happen anytime, anywhere and to anyone!

Stash away money regularly for an emergency fund. The general rule of thumb is to save at least 10 percent of your take-home income.

Ensure the money is kept in liquid mode (which means you should be able to encash it in a few hours). Remember, the emphasis is on withdrawing the money ASAP!

Backsliding on resolutions is natural; just don't give up.

When the urge to give up is powerful, remember that raw, brutal fact: If you don't save you will, in all probability, will outlive your money!

That's a sobering thought with which to start the year, is it not?

Illustration: Uttam Ghosh

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Sudhanshu N