he best -- and sometimes the worst -- thing about Time is that it passes! That is why New Year will always be so special; it is a tribute to the year gone by and an embrace to the year to come!
And, like all the years that have passed, I'm sure 2004 saw you grapple with your share of financial trials and tribulations -- you made some errors, savoured some victories and swore never to make certain mistakes again.
Unfortunately, if one is not careful, bad financial judgments can flourish with every year.
If you think it is time to bury them this year, make these resolutions NOW!
1. I won't cheat
The czars of investment belonged to one school of thought: A business/ operation without character is not worth looking into! Let's individualise that; remember, your financial integrity is what sets you apart.
Which brings us to the question: How do you define integrity?
That's not too difficult actually -- be honest to yourself and to others.
If you have been suppressing your sale of Infosys' shares to evade capital gains, padding your expense account, misappropriating personal financial information to avail of consumer finance, cutting checks against accounts where there are insufficient funds, running huge credit card bills and absconding... then get up and smell the coffee!
Your financial reputation, which is an offshoot of your integrity, is a snapshot of your entire spending history, skeletons et al. Any negative mark on honesty and integrity could make the financial community ostracise you. And, trust me, that's one big community!
2. I will not borrow against my home unnecessarily
Want to cash in on your home? Sure, you may get a great deal but think again. Do you really want to use the roof over your head to pay back the loan you raised on your plastic?
Home equity loans are straightforward. The bank will take your home as collateral and give you credit (a loan) on its value. If you fail to pay back the loan, they have every right to take possession of your home.
Don't be tempted by the promise of extra cash or lower monthly payments! It's just not worth it to put your ownership or your equity in your home at risk because of your lack of financial discipline.
Explore borrowing from other loan lines that do not use your home as collateral. You can try a personal loan or even a loan against shares. And, yes, please cut up those credit cards along with a daily chant of Resolution No 3.
3. I will not buy now and pay later!
Have you lived the entire year from one paycheck to the next? Are you making minimum payments on your credit card and carry forwarding the rest? These are bad signs.
You can start by going easy on your credit card/s everytime you venture outdoors.
Remember, you are paying for items (which in all probability you don't need) with rupees (which will only exist in the future). And that too at an exorbitant price! The longer you take to pay off your debt, the more outrageous interest and finance charges you accumulate.
This is not a good idea from any angle. Heed conventional wisdom and DON'T give in to temptation. I know it's excruciatingly difficult, but nothing (and I mean nothing) eats into your disposable income more than ridiculous credit card impulse buying!
You really want something? Fine, walk away, save up hard cash and then buy!
Instant gratification through your credit card is only going to hurtle you down the slippery slope of burgeoning debt.
4. I won't make silly, ill-researched investments
Your train mate just told you of this great investment opportunity that offers phenomenal returns! Before you part with your cash, ask yourself what are the chances of you ever getting your money back.
Remember, there are no free lunches in the world of finance and returns.
Junk bonds (high risk, high returns) are often issued by new and/ or untested ventures. In short, companies that are wobbling on a shaky financial footing. They promise a great rate of interest with one hand but dish out tremendous risk with the other.
The high return is tempting, but it comes with the deadly probability of being left with nothing but financial trash!
If you have the money and are willing to take the risk, go for it. If not, choose safer options like fixed deposits and post office schemes. If you still want to invest in the stock market, do it via an equity mutual fund.
Whatever you do, don't get carried away by the possibility of quick returns.
The last word...
You don't have to make these resolutions. You can choose to ignore them out completely.
Do remember, though, that in the world of money, order seldom emerges from chaos! It would be a good idea to consider these relatively painless promises and schedule a date with Wealth in 2005!
Five ways to manage your money in 2005