Express news service
It’s the end of the year and you need to clean up. You can do a lot of homework to get everything in order. Your finances deserve the same attention.
Take a break and review your financial decisions so far. You might notice things that could make a difference to your finances in the long run.
There may be unnecessary subscriptions that you may wish to discontinue or investment opportunities that you could have easily used to generate additional return.
Your expenses or expenses
The first step in this exercise is to review your expenses for the year. If you have a credit card or savings account with a state-of-the-art bank, you can use their mobile app or website to analyze your spending.
There are consumer surveys that show a difference between how much people “think” they spend and how much they “actually” spend. The convenience of using your smartphone for payments means your spending would be considerably higher than you might think. If so, you might want to know the truth. Most of you have more than one credit card or bank account. You may want to use a credit card with a lower limit or a bank account with your money designated for your spending. This way, you can curb your urge to spend effectively.
The other important thing is to check your credit score. You may want to make a course correction if you haven’t paid off your loan on time. Don’t drop it; otherwise, you will end up paying more interest on your loans. Your credit card statements for the year would make an interesting read on relevant and irrelevant spending. Try to highlight them and think carefully. Ask yourself questions about their needs and make sure mistakes don’t repeat themselves in the New Year.
It’s time to take stock of your sources of income. Everyone wants more income to make their dreams come true. However, your current job or business may not be enough to help you reach your financial goals. Many Indian households invest in real estate to generate rental income. It works as a second income for many. However, you need to determine the cost-benefit ratio of owning a property and the adequacy of your rental income.
If you have invested in more than one property, you may want to consider holding more financial assets. Some stocks pay a higher dividend each quarter. They are generally blue chip companies with a consistent history of earnings. The valuation of these companies does not matter if you are a long term investor.
The other option is to look to mutual funds with a monthly dividend payment and offer market-linked returns. You need to weigh the benefits of rental income from the additional properties you own with the ease of owning financial assets and generating dividend income. It’s good to talk to a financial advisor to understand the nuances.
It might be a good idea to rebalance your portfolio. The year 2022 could be a year of rebalancing. The world has enjoyed the benefits of easy money, where interest rates have long hovered around zero. However, things are changing fast. The United States is experiencing an inflation rate not seen in 52 years. This could cause the US Federal Reserve, the central bank, to raise rates as soon as possible. The year 2022 could see rich countries raise their interest rates. In India, that could mean a lot. First, the stock markets could see some upheaval.
As the US dollar strengthens, money could flow out of India and other emerging markets. Second, a strong recovery for more than 18 months could mean institutional investors resorting to choppy portfolios. They would leave sectors sensitive to fluctuations in interest rates and move into new industries by solving problems through technology. Digital transformation is a buzzword in meeting rooms. Companies that provide products and services that enable digital transformation would attract more money.
(The author is editor and publisher at www.moneyminute.in)