Every January I venture down a well-traveled path paved with gallant, and often impulsively conceived, New Year resolutions.
Come December, I look back and realise that I have failed to live up to them.
This time round, I have done it differently. I have started the year with a positive and healthy attitude.
So no more resolutions with the prefix "I will not .".
My 2006 resolutions are all "I will" commitments.
I will have long-term relationships other than with my stocks.
My only long-term relationships seem to be with stocks.
Once I buy a stock, I tend to get a little too seriously committed to it.
Daily, I will keep continuous track of its movement vis-a-viz the Sensex.
If the price slumps too much, I tend to get heartburn.
If it begins to gallop, my heart skips a beat.
And despite the fact that it is giving me phenomenal returns, I am reluctant to sell.
I am aware that this is one of the biggest investing mistakes one can ever make: getting married to their stock. Stocks are investments that are supposed to make money for you. So when they do, sell!
I will understand that debt too needs to be understood and analysed.
All debt is not bad.
When my parents want to pull me up for saddling myself with too many loans, they quickly point to my brother to make a point.
Sure, he too is servicing loans. In fact, of a bigger amount that I am.
What's the difference?
I have a personal loan, a credit card loan and a car loan. The first was to fund my scuba diving a holiday abroad in Mauritius, the second was to finance my lavish lifestyle and the third is a no-brainer.
My brother has two loans: a home loan and an education loan. Both of which are used for noble purposes (so my parents think) and both of which get tax benefits. That's right, the tax man actually looks favourably upon these two loans.
My loans are not used to build an asset (like a home), repayment gives me no tax benefits and it has not helped me further my career prospects (like an education loan).
Moreover, the interest rate on a personal loan and credit card loan is the highest when compared to other loans. It will be at least 24% for revolving credit on your card and at least 18% on a personal loan.
Also, my brother has gone for shorter tenures which means higher Equated Monthly Installments (money you pay every month towards loan repayment) but lower final outgo. I have stretched to the maximum tenure possible, which means I eventually dish out more.
Next time I plan to borrow, I shall look at all these factors and see whether it is worth it.
I will gratefully use every sop the tax man dishes out.
That's right. I am not going to pay one more rupee in tax that I can avoid.
I am going to pore over Section 80C in detail. That means, smart investment planning.
I will take a risk and invest some amount of money in Equity Linked Saving Schemes. These are diversified equity mutual funds that invest in shares of various companies of various sectors. The difference with other mutual funds being that they offer a tax benefit and have a lock-in for three years.
For my long-term needs, I will invest some amount in the Public Provident Fund. Since this is a 15-year investment, it will come in handy for my future needs. Also, being backed by the government, this will provide me with safety to balance the risk of ELSS.
Probably will take a life insurance plan. Term insurance is not for me because I have no dependents at all. So will opt for an endowment plan. This means that at the end of the tenure of the life insurance policy, I get the sum assured (amount I am insured for). Should I die during the policy tenure, then the person I nominate will get that insured amount.
To be on the safe side, I am also going to opt for medical insurance. I don't want a hospital bill wiping out my meagre savings.
The premium paid for Mediclaim is eligible for tax benefits under Section 80D of the Income Tax Act, 1961. This is in addition to the Section 80C benefit of Rs 1,00,000.
So that's it.
This year, I am going to become more investment savvy. No more just me working hard for my money. This year onwards, my money will start working for me.
Here's to a money satisfying 2006.
Any resolutions you plan to make to save money? I would love to hear them!