5 ways to financial freedom in 2013

Simple tips to set your finances right in the New Year!

Whoever said money can't buy happiness probably didn't have enough money!

This famous saying reminds us that getting our personal finance in order is probably up there along with career and health as one of the most important resolutions for 2013. It's important to have financial freedom and flexibility to spend just that little extra amount, in case your daughter wants that new Barbie doll or wife asks for an upgraded refrigerator. Having your personal finances in order gives you the space, peace of mind and flexibility to make the most of your personal and family life and create solid bedrock for your future well being.

Here is a list of 5 resolutions for your financial well being in 2013:

1. De-clutter your financial life

So you have a bunch of savings and current accounts and loads of cards, financial schemes and too many financial instruments cluttering your mind and personal balance sheet. Most of us open a savings account for all members of our family, and sometimes two or three for each one of them. Each account blocks that precious minimum five thousand rupees or so of minimum deposit. We are simply unaware that how much of our money is getting blocked and actually lying dormant in these multiple bank accounts. 

Year 2013 is to de-clutter your life and personal finances. Close the savings and current bank accounts that you have not used even once in past six months. Consolidate your savings from all these dormant accounts and you will be surprised how much you accumulate from these dormant accounts once you do this clean up. Invest this money in either a Bank FD or company fixed deposit, or a good mutual fund and you will have taken a good first step to de-clutter your financial life.

Cut the credit cards that you never used in past six months and de-clutter your personal balance sheet.

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2. Be aware of interest rate cuts

Year 2013 is a year of interest rate cuts, or so is everyone from finance minister to TV analysts hoping. Interest rates would see a minimum of 100 basis points or 1 per cent cut through-out this year and may even go up-to 200 basis points or 2 per cent of rate cut as the year progresses if inflation is brought under control.

One should be aware of this rate cut cycle and with each rate cut, you should hunt for the best deals available around you for your house loans, car loans and personal loans. Don't be lazy to switch banks to take maximum benefit of the bank offering the lowest mortgage to save that 0.5 per cent that you are paying extra for your current loan. This 0.5 per cent saving would be a huge amount by the time you end up paying your twenty year mortgage or seven year car loan. So be aware and be aggressive.

3. De-clutter your house

Minimalism is in! Don't clutter your house with extra furniture, electronics, gadgets and stuff that you won't probably use. More clutter around you takes up your precious time that you otherwise would have spent with your family, and also clogs your financial arteries with loans and expenditure.

Sell stuff that is lying around your house and which you don't use at all. With all the new internet portals and listing websites, it is easy to sell your old TV, old furniture, gadgets, cell-phone, exercise machine that you never used and stuff that is cluttering your life and your house. This way you will free up your house and earn that extra amount that you can use to pay off credit card bills on time. More space and less clutter in your apartment are definitely IN for year 2013!

4. Create slabs and budget for each spend category

Little bit of indulgence makes life that much happier for you and your family! Allocate a fixed amount every month that you can easily afford for indulgent shopping, travel or purchases. Don't overstep this amount for each category and once you adhere to this rule, your finances would be so much easier to manage. 

Create slabs for compulsory items such as grocery, education, fuel and loan payment and slabs for discretionary spend. This way you would have a mini budget for each month and would be aware where your hard earned money is going.

5. Don't forget to pay yourself

Probably most important step is to save little bit each day and each month and use this money to build your future nest. Even a couple of thousands saved each month, add up to a sizeable amount by the time you retire and would give you a great cushion in case your kids want to go to a expensive college or a lavish wedding for your daughter or a world tour for you and your wife.

Invest a small amount in equity SIP, or buy that 1 gram gold coin each month, or invest in a small plot on the outskirts of the city and force yourself to save each month. This is your investment for your future and will take you a long way to build a happy and financially secure life for you and your family.

Have a great year 2013 ahead!