So by the end of January we have made our resolutions, promised to keep them, and have now broken them, have we not?

Well what are the major ways a person breaks / destroys resolutions? Not sure about the other resolutions – but financial resolutions are destroyed by the following people behavior:

1. Missing out on the SIP payment: Some people promise to start, but just do not start! Either they wait too long or miss out two or three payments. In some cases the mutual fund house terminates the SIP and then the person does not start it again!

solution: instead of doing one SIP of 3X do 3 SIPs of X each. In case of a cash crunch one or two SIPs will fail…but at least one will go on smoothly.

2. Underestimating their ability to invest: When a person says ‘I can invest Rs. 40,000 in a SIP’ I do not ever say..’Why not 50k?’ . After a few months when i see their Savings bank account and a big sum is accumulated, I tell them “If you had invested Rs. 50k you would not have missed the 10k …see the extra amount lying in your SB a/c!

solution: same as 1. Stretch – if you cannot meet the requirement for one or two months, you would still have stretched for the other 10 months, and created a bigger corpus. As soon as you arrive at a number, just up it by 20%. It works.

3.  Buying on Impulse: Buying things on impulse is normally a sign of not planning. If you cannot control this, go out of the house WITHOUT your credit / debit cards. Just carry some cash…this will prevent a Rs. 30k impulse…but will allow a 2k impulse!

4. Withdrawing on Impulse: Withdrawing cash from the ATM should always be on some particular days – say every Friday you withdraw 12k…this will ensure that all your CASH expenses are within Rs. 48 a month. Please put in your own numbers, but make it a pattern.

5. Having to much debt for all kinds of reasons: Having debt for a house, car, home improvement, European vacation…can hurt even if you are paying all the installments on time. Try to reduce the number of reasons to borrow for, if possible consolidate all the borrowings.

6. Do not wait perenially for taking that term insurance, do it now. None of us have a clue of when we are going to die, do we?

7. Start improving your financial understanding. There is no escaping learning goal setting, putting in the numbers and adjusting them for inflation, choosing the products suitable for each goal or having the discipline to invest in one fund and know when to switch asset classes.

8. Do not torture yourself if you missed out one or two SIPs during the last year, or in the current year. It happens, just meditate a little and go ahead. Relax.

Now go ahead and fulfill all the resolutions – you know what are the pitfalls!