3 Personal Finance Tips for 2020

This new year, you might have started working on your resolutions. Also, you might be getting a lot of emailers and messages regarding various things that you should consider this year. We have also come up with three special tips for you, which, if followed properly, will shape your personal finances in 2020.

Pay off your credit card debt
With an interest rate of 30 per cent to 40 per cent per annum, credit cards are the costliest debt available in the market. This new year, make sure that you pay off your credit card dues and ensure payment of the same on time. This will help you to avoid falling into a debt trap. Also, limit the usage of credit cards. Use a credit card only in case of emergencies. You should also consider avoiding EMIs on credit cards. This might cost you a lot. If you have a huge amount due, then it is prudent to shift it to a personal loan. Personal loans have comparatively cheaper interest rates.

Emergency fund
This is one of the basic things that you should do to manage your personal finance this new year. Having an emergency fund in place would help you to cover your short-term emergencies without compromising on financial goals or getting into debt. The emergency corpus would help you to shed the financial load in case of a temporary income loss. Generally, having three to six months of expenses in an emergency fund is wise. Having said that, every individual is unique and needs to assess his or her financial situation before deciding on how many months of expenses one should keep aside as an emergency fund.

Insurance
Generally, insurance is considered more as a saving instrument than a risk-protecting avenue. This year, make sure you review your insurance requirement and be adequately insured. Situations never intimate you before taking place. So, it is imperative for you to be prepared and be properly insured to avoid big holes in your pocket and a compromised lifestyle. In case of life insurance, at least have a sum assured of 10 times your annual income. It is always important to assess your life insurance requirements before buying. Along with life, also assess your health insurance and have a family floater and individual health policy, depending upon your life circumstances. Even if your employer provides you with the health cover, it is essential to have separate health insurance. The one thing that you always need to remember is that the purpose of insurance is not to save tax but to protect you from various life and non-life risks.