8 tips to create wealth in 2011

I, like so many others, have promised myself that this New Year will not find me obsessed with New Year's Resolutions. Yet, on January 1, 2011, I was holding a list of new items to accomplish in 2011.

On the top of my list was losing those last 12 kgs and a healthier lifestyle that would get me there but this year I am adding financial health to my long list too. Notice I did not say I am 'fixing my finances' or I will be 'debt free'.

Nor did I say I was going to keep a better budget, even though that is an important aspect of financial health. This year I am looking at actions that I can actually DO to improve my financial health.

Let's take a look at some 'healthy' steps in getting your money financial fit.

1) Take a close look at your financial portfolio

This year take a look at your financial portfolio from a different light. According to the RiskMetric Group, whether you are an aggressive investor, conservator or somewhere in-between, you should be asking yourself "How risky is my investment portfolio?"

*In 2011, take a look at your portfolio and the balance of your asset allocations. Make adjustments where needed.

By doing this you will set your money up to work for you, create long-term wealth and provide much need protection in times of turbulence.

2) Budget and pay off debt

As always, budgeting and paying off debt are crucial to your financial health. Managing your money and paying off debt, will not only improve your financial health but your overall well-being. Not a bad start to a new year. Here are a few simple steps that will make it easier.

Set up your accounts to automatically take the money from your paycheque to pay for expenses such as, telephone, utility and credit card bills. While setting up your automatic payments, don't forget to set up direct deposits to savings accounts, insurances, mutual funds, etc.

An important aspect of budgeting is sticking to it! Make it fun! Create realistic goals; reward yourself and post articles or pictures of what you are working towards around the house or office.

Get a "Financial Buddy" to support you along the way and set up a meeting with her/him once or twice a month to go over your finances. By doing the above, it will help you stay focused and create some "financial stress relief".

*Source "Investments: Measure Your Risk and Create Wealth" written by Gregory Elmiger and Steve S. Kim

3) Pay yourself first

If you are just starting out from college or have a lot of debt to pay off, take a small amount each month and put it into a savings or investment scheme. Seasoned investors should challenge themselves by increasing their investments by 5-10 per cent.

Creating a small nest egg will allow you to breathe easy in times of need. If you invest your money wisely, you will be thankful at the end of the year by the increase in your net worth.

4) Maximise financial benefits

Do a self audit and scrutinise how well you are maximising your financial benefits. Are you utilising all tax breaks that the government has to offer? Have you contributed the full amount allowed towards your Employee Provident Fund (EPF)?

In reviewing your investments, are there any changes that need to be made? If so, do it now.

5) Improve credit scores

Credit score or rating is a relatively new term in India. A Credit Information Report (CIR) is a factual record of a borrower's credit payment  history, it will contain information regarding credit card and loan amounts.

Credit grantors will use the information to make lending decisions.

By managing your credit early, you can avoid unpleasant or embarrassing financial experiences and avail the best loans and interest. Also, if you get transferred overseas, good credit is essential and can affect everything from renting an apartment, to leasing a car. Ways to manage your credit are:

a) Pay your loans and credit card dues on time. Avoid late payments. Not only do you pay more in finance charges but it can affect your credit score negatively.

b) Keep your total debt under control. If you have significantly high debt, consider using some of your savings to pay it off quickly.

c) Space out your loan and credit card requests. You don't want your credit report to look like you are constantly seeking credit.

d) Check your credit at least once a year to verify that everything is accurate.

You can access your CIR report at the Credit Information Bureau India Limited (CIBIL) web site. Read more about how to get your credit report.

6) Be more charitable

Donating to a legitimate NGO, improves your health, both financially and physically.

On the physical side, studies show that when we contribute a set amount of money to better someone other than ourselves, we are happier.

A general rule of how much to donate is 10 per cent of all earnings. How does donating to an NGO affect your bottom line? Tax deductions, of course!

7) Go green, become more money efficient

Do you go to sleep at night to the rat-a-tat-tat of an old a/c unit? If so, you are not only using unnecessary energy but are wasting hard-earned money as well. Maybe it is time to update that older unit to a more eco-friendly, cost-efficient, split a/c.

Look at your home, car and office to see if there are other improvements that can save you money and create a greener environment.

8) Invest in yourself

A large income is the best recipe for happiness I ever heard of: Jane Austen.

The best thing anyone can do about their finances is to increase their income and it's not so easy in this competitive world.

It calls for investment in yourself which is by far the best investment you can ever do. Read more books related to your profession, network with more people, do some new certifications, foster greater relationships with colleagues, take up more responsibilities at your work place and make sure that you are growing professionally.

This will ensure that you either get a promotion with a big pay hike or get hired by some other organisation.

A few dollars richer

By following these healthy financial steps, you can guarantee 2011 is your best fiscal year to date!