The start of a new year is the perfect time to make positive changes. Decluttering is an exercise that helps you take inventory of your things and get rid of or change what you no longer need. However, decluttering doesn’t just apply to spring cleaning, it also applies to your personal finances. Re-evaluating your financial life at the beginning of the year, whether it’s cutting unnecessary expenses, managing your debt, or cleaning up your investments, will significantly improve your money management and make your money work for you twice as much. . With that in mind, let’s take a look at how you can organize your finances to start your financial journey in 2025.
make a budget and stick to it
An effective budget is the foundation of good financial health. It’s not complicated to create. First, list your income and necessary expenses such as rent, utilities, mortgage, etc. It also allocates funds for discretionary spending and savings. For example, if your monthly income is Rs 50,000, try the 50-30-20 rule. Allocate 50% to necessities, 30% to living expenses, and 20% to savings. Track your spending in real time with a budgeting app and review your budget regularly to identify and control overspending.
Check your subscription and membership
Review the subscriptions and memberships you have and identify which subscriptions and memberships have been used the least over the past year. Disabling these services may free up some funds. For example, if you cancel a Rs 500 monthly OTT service that you hardly use, you can save Rs 6,000 a year. Follow this for different categories of expenses and check your bank statement for recurring charges. Identify what you really need and cancel what you don’t. The money saved can be put toward an emergency fund or investment plan.
Pay off your debts immediately
High-interest debt, especially credit cards, can destabilize your finances if not managed properly. As part of your decluttering journey, make a plan to pay off all your debts, especially those with high interest rates. For example, let’s say you have a credit card with a 36% annual interest rate. I have an outstanding balance worth Rs 100,000 on this card, and if I repay it on time, I can save about Rs 36,000 that I have to pay in interest annually. Set up automatic reminders and instructions to make sure your bills are paid on time. Also, consider consolidating your debt at a lower interest rate to save money.
Review your insurance contract
Insurance is very important to protect yourself from the effects of financial emergencies. However, if you fail to pay your premiums, your coverage may lapse, putting you or your loved ones at risk. Review your life, health, and vehicle insurance coverage at the beginning of the year and adjust your coverage based on your changing needs. For example, if your health insurance premium payment is due in February, set aside the amount you need to avoid last-minute scrambles. Also, don’t forget to update your candidates if your situation changes.
protect your finances
Keeping your money safe is just as important as saving it. Follow recommended safe practices and be careful with your financial information. This includes using strong passwords on online banking platforms, enabling two-factor authentication, and monitoring your accounts for suspicious activity. Keep three to six months worth of expenses in an easily accessible emergency fund to help you weather unexpected challenges. For example, if you use your credit card frequently, set a credit card transaction limit to limit your liability in the event of unauthorized use.
Review and adjust your portfolio
Simplify your investment portfolio by consolidating accounts and eliminating underperforming investments. For example, if you have cashback insurance that costs high premiums and doesn’t give you results, consider canceling it and redirecting the funds to more profitable investments. Remember that diversification is key to optimizing returns while reducing overall risk. Be careful not to over-diversify as this can be complicated to track and affect your returns.
Automate your investments and savings
Automation is a great way to ensure financial management discipline and save time. Save, invest, and pay off debt without any human intervention, and avoid missed payments and late fees. For example, you can set a schedule to transfer Rs.5,000 to your savings account every month to ensure a steady stream of savings.
Tidying up can have beneficial results, no matter what you apply it to. With a clear plan, disciplined budgeting, and timely debt repayments, you’ll be on track to reach the end of 2025 with a solid financial foundation.
Adhil Shetty is the CEO of BankBazaar.com.
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