New Year brings with it new beginnings and optimism. A lot of people like to usher in the New Year with resolutions that they eventually end up breaking. Many of these New Year resolutions revolve around personal finance since financial well being is an important aspect of life. A lot of people usually fail to maintain such New Year financial resolutions because they over complicate their resolutions making them hard to maintain.

Before making your resolutions for 2014, the most important thing you should do is to review your current financial status. Here is a quick check for making a simple and achievable New Year resolution for anyone irrespective of earnings and expenditure. Apart from improving the overall financial health, this can help you take smarter financial decisions in the long term.

Review your investment portfolio: Reviewing one’s investment portfolio by the end of the year is one of the best steps for taking a good investment related resolution. While reviewing the overall investment portfolio, one must ask some basic questions as to how risky the investment portfolio is and explore the adjustments where required. If you are single and have started working only recently, you can afford a riskier portfolio compared to married people with families. One thing that is common while evaluating your personal investment portfolio for the year is to always maintain a balance between long-term goals and any emergency requirements for a rainy day.

Pay off debt: Paying off old debt is one of the best ways to usher in the New Year. Budgeting and paying off old debt might not be as difficult as it may appear and only require a principled approach. One can set up accounts to automatically deduct monthly expenses. Get out of the old debt trap to increase the chances of improving your financial health in the coming year. The best approach is to start by paying off the debt with higher interest rates like credit cards and personal loans. If you have some surplus cash, you may also consider paying off loans as pre payment instead of paying EMIs. The best way to resolve pension debts is to keep a lookout for better interest options in the market to reduce the total term of the home loan thereby saving on the interest cost.  You can use the additional pay outs you received this year like bonus, incentives, LTA etc. for paying off unwanted debts.

Invest in an emergency fund: In this day and age of increasing inflation, sudden job loss or a sudden illness of any family members can damage your finances. Therefore, it is imperative to consider investing in an emergency fund. Most financial experts are of the view that such emergency funds which are also known as contingency funds, must hold finances that can sustain the dependant members of the family for a minimum period of six months. If you have not given due thought to have an active emergency fund, make plans to start it this New Year. Make regular investments in your emergency fund which can gradually help you a build a corpus that is liquid with the ability to earn handsome returns.

Protect your family’s financial future: Protecting your family’s financial future is an essential step that needs to be a part of each financial resolution. A lot of people explore life insurance but totally ignore medical insurance for dependants and immediate family members. If you are one of those who have neglected medical insurance of your dependants, plan for a good package by this New Year.
For people seeking life insurance as an investment, one needs to understand that life insurance helps your dependants in case you are not around. Considering insurance purely as an investment vehicle is a bad financial decision that must be changed.

Improve credit scores: Another great New Year resolution is to improve your overall credit score (CIBIL). Many people are stuck with bad credit score due to their own financial mismanagement. Take a call this New Year to cut out on unwanted credit cards and loans so that you do not end up spoiling your credit score in the coming year. If you are planning to avail some loans in the coming months, make sure that you keep a minimum gap of six months between the two loan applications. Pay your loans and credit cards on time, avoiding late payments.