Monika Sharma, who is working as a marketing manager, needed to save more money than she expected at the end of 2022. On the other hand, her junior, Kiara Ahuja, saved more than what she expected. Both of them set money resolutions. However, only Kiara worked towards it, and Monika made many mistakes this year.
In order to make the right money decisions, it is important to have a financial plan in place. While making new year resolutions this year’s, it is time to set money goals and work towards them.
Here are 5 money mistakes to avoid in 2023:
1. Setting unrealistic goals:
Focusing on multiple goals and resolutions for the new year can seem intimidating. Paying off bills, buying a house, a gadget or a car, planning for retirement, planning to travel, paying off debts etc., all in one go without any proper financial plan can seem unreasonable. Hence, it is crucial to set SMART financial goals to achieve them within a specified time frame decided by you. If you are planning to purchase a house or car and planning to travel, along with investing X amount of money for retirement, you can start by adding time frames for each, even if it is after 5 years, 10 years or 15 years. You can allocate an amount you want to save for each goal by the end of 2023 and align your investments accordingly.
2. Not planning for retirement:
Not planning for retirement: Do you dream of early retirement and living comfortably with complete financial freedom? Your dreams will turn into reality if you start working for them! Check out LXME’s Retirement Calculator. Here, compounding plays a very crucial role. Compounding can turn a small sum of money into comfortable nests. Instead of waiting for the next year because you don’t earn enough, it is better to start this in 2023, even if it is smaller. You can start investing with as low as Rs. 100/- in LXME’s Rs 100/- Debt and Equity Fund.
3. Not building an emergency fund:
Emergency Fund is a safety net against financial turmoil. This interruption can be due to a medical emergency, unemployment, home or car repairs, unforeseen accidents, loss of regular income, or other unexpected events. It is recommended that each individual or family set aside at least 6-8 months equivalent of their monthly expenses for their emergency fund.
4. Spending frivolously and not budgeting:
Spending frivolously and not budgeting: Whenever you’re tempted to buy something you don’t need, start thinking about your goals for the new year. It is justified to spend on needs and essentials. However, wants can wait till they turn into needs. It is better to put that amount in your respective funds to achieve your money goals.
5. Avoid falling into a debt trap:
You must always have a plan to pay off the debt, whether it is through loans, credit cards or any other source. To pay off your debt, try the snowball method, i.e. start paying them one at a time, starting from the lowest interest rate to the highest once you choose the strategy to pay off your debt, stick with it. Avoid taking on new credit card debt, loans or any other source of debt, especially with high-interest rates, especially if you can not afford to pay it back.
It is super essential for you to keep reviewing your financial plan every time and again and make changes accordingly. Financial planning involves the determination to earn, save, spend, and invest to achieve your money goals. So girls, start setting your money goals for the New Year and working towards them! Check out the LXME Goal calculator to start planning!
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