The year 2021 marks the start of a new decade. Moreover, with the COVID vaccine almost on the verge of being launched, the year is also filled with hope and new beginnings.
In keeping with the tradition of every New Year, you make various resolutions. But how many do you stick to? As January progresses to February and then February moves to March, most of the resolutions are done away with.
How about doing something different for a change? If the year 2020 and the COVID pandemic have taught us something, it is the importance of being financially prepared.
The pandemic took everyone’s finances by surprise and if you want to avoid a possible reprise, how about taking some financial resolutions for the year ahead so that you can be financially healthy? 

Here are some of the best financial resolutions that you can set for 2021 to sort out your finances –

1) Investing in Health Insurance, Adequately!

Even though the COVID vaccine is almost ready, the time by which you and your family get the shot is still uncertain. It might be one or two years before the vaccine effectively reaches everyone and till then, the threat of the infection is considerable.

If you face complications and are hospitalised, which is not uncommon, the treatment costs might tax your savings considerably. While many States have specified a cap on COVID treatment costs are private facilities, the figures are still grim. Have a look –

Get a Health Insurance















To top it off, if multiple family members need hospitalisation, the costs would only multiply. To meet these costs head-on, invest in a health insurance policy with an adequate sum insured.

You can opt for COVID specific health plans which have been launched – Corona Kavach and Corona Rakshak, especially for protection against COVID related medical costs. For other illnesses and injuries, invest in a comprehensive health insurance plan for your family.

Opt for a high sum insured because the medical costs are increasing steadily. If affordability plays a spoil-sport, opt for top-up or super top-up plans to supplement your coverage but do take up the resolution of having an adequate cover, at all costs.

Pro tip: Don’t get complacent if you have an employer-sponsored group health plan. While the policy would cover hospitalisation expenses, it would be insufficient in covering high treatment costs.

Even if your employer offers a group health scheme, consider it to be a bonus and invest in an independent health plan for customized and sufficient coverage.

Read more about how to plan insurance for you and your family here


2) A Term Insurance Plan is Necessary Too!

While health insurance takes care of your medical expenses, what about the risk of premature death? Whether it is due to COVID or other illnesses or even accidents, you are constantly exposed to the risk of a premature demise. While you cannot eliminate the risk, you can definitely insure it.

Term insurance plans help you cover your life risk at affordable premiums. You should opt for a high sum assured so that your family receives adequate financial assistance to fulfil the financial responsibilities if you are not around.

So, after you are done with health insurance, resolve to buy a term insurance plan for complete financial security.

Pro tip: Compare the available plans and then invest in one which offers a comprehensive scope of coverage at affordable premiums. For the right sum assured, there are online Human Life Value (HLV) calculators which you can use.


3) Creation of an Emergency Fund

The past year taught us one thing – anything can happen anytime. People in established jobs can lose their positions, availability of liquid funds can become an issue, a profitable business might completely shut down and whatnot.

To be financially prepared against such contingencies, an emergency fund is needed. You should set aside at least 6 months’ worth of your income in a liquid fund which can be accessed whenever an emergency strikes.

If you have an emergency fund, review its adequacy. If you haven’t created one, do so in the coming year so that any financial contingency would not threaten your best laid financial plans.

Pro tip: If you are unable to set aside a lump sum amount into an emergency fund at once, start small. Spare what you can and then build up the fund slowly but steadily.

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4) Paying off Debts, Without Default!

Loans have become a common part of modern man’s lifestyle, both in the rural and the urban segment.

According to the Household Survey on India’s Citizen Environment & Consumer Economy, also called the ICE 360° survey, which was conducted in 2016, 27% of the surveyed households had at least one outstanding loan.

While 30% of rural households were found to be indebted, the percentage was 21% for urban households. Have a look –

paying debts



















Moreover, by March 2020, Indian households accounted for Rs.43.5 trillion in debt thereby causing retail loans to account for 21.3% of the total GDP. (Source:

While loans provide easy funds for your financial obligations, repaying them on time is of the essence. Defaulting on loans not only causes heavy interest outgoes, but it also hampers your credit score.

Ultimately, with mounting default, you enter into a debt trap, coming out of which takes years. So, pledge to pay off your debts timely in the coming year so that you can avoid the possibility of a debt trap.

We have made a complete Guide on Debt Management – How to Manage Your Debts Effectively. Read Now!

Pro tip: Pay off your credit card debt and personal loans first because they have high-interest rates and affect your credit score considerably. Home loans, on the other hand, can be continued because they give tax benefits but make sure to pay the EMIs on time.

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5) Reviewing Your Portfolio Periodically

2020 was not so great when it came to your investments. Market-linked investments were in the red when the financial year started. However, since then, the equity market has recovered and now, the Sensex is trading at pre-COVID levels. Have a look –

review your investments periodically


As the Sensex has rebounded, your investments might have recovered too but there is an important lesson to learn from this crash.

The market is dynamic and so are your financial needs. So, it is important to review your portfolio regularly in tune with the changing market dynamics and your financial needs. Try and churn your investments to minimize risks and maximize gains.

For example, as the COVID impact was increasing in March, if you would have shifted to debt, you would have been able to book your equity profits and protect them against market volatility.

Similarly, now, as the markets are rising, it is sensible to shift to equity to gain on the bullish market. Having a stagnated portfolio is bad as it prevents you from getting the maximum returns and also exposes your investments to unnecessary risks.

Pro tip: Invest in mutual funds to get the benefit of diversification rather than picking specific stocks. You can choose different mutual fund schemes as per your risk appetite and investment horizon.

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6) Picking Your Investments as Per Your Need and Risk Appetite

Planning a financial portfolio is no joke. You need to pick investment avenues depending on your financial goals, investment horizon, disposable income and, most importantly, risk profile.

Creating a haphazard portfolio by mimicking what others have invested in would not meet your financial needs sufficiently.

Your portfolio should be unique to your needs and requirements. So, first and foremost, assess your risk appetite. Usually, if you are young, i.e. in your 30s or 40s, you can afford to take risks since you have long investment tenure in front of you.

At this age, equity-oriented savings avenues would be the best as they would help you maximize your wealth.

In your older years, however, your equity exposure should reduce as you are nearing retirement and you need to protect your capital. So, understand your life stage and risk profile and then select investment avenues.

Moreover, whatever risk profile that you belong to, have a well-diversified portfolio. Keeping all your eggs in one basket is not wise. Variety is the essence of life and of investments too.

So, if you are risk-loving, allocate a part of your savings in debt to create a stable portfolio sturdy enough to weather out market volatilities. On the other hand, if you are risk-averse, invest a part of your savings in equity-oriented avenues too which would help you earn attractive returns and create a considerable corpus for your financial goals.

Just like a balanced diet is necessary to remain healthy, a diversified portfolio is needed to remain financially healthy.

Pro tip: When you start financial planning, first assess your disposable income and risk appetite. Then list the investment instruments available and classify them as risky or non-risky.

When investing in debt, choose debt mutual funds or other market-linked debt instruments to earn inflation-adjusted returns from your investments.

Tax planning is also necessary when creating a financial portfolio to ensure that you can minimize your tax liability and maximize your investments.


7) Budgeting

How many times do you find your income being spent before the end of the month arrives and you scraping by just till the month ends?
If your answer is ‘Often’, something is wrong with your financial planning and this something is ‘Budgeting’.

Budgeting is the first step in determining your disposable income and the amount that you can invest. If you skip this, overspending, being in debt and not having enough would always be a reality.

If you want to get your finances in order in the New Year, start by budgeting. Create a monthly budget listing all the sources of income on one side and the possible expenses in the other.

Besides the essential lifestyle expenses, make room for personal expenses as well but be a bit stingy in this aspect, especially if your income has shrunk due to the pandemic. Budgeting helps you figure out your incomes and expenses and also plugs unknown leaks. Moreover, when you have a budget, you are less likely to splurge or overspend.

If you haven’t learned the importance of budgeting as yet, it is time you do. Weed out unnecessary expenses and follow a strict budget if you want to save a decent amount of money for investments.

Rather than using up your income on expenses, try and create investments first and then allocate your income towards expenses, especially personal ones.

Pro tip: Budgeting is a pen and paper job or a computer screen and keyboard one. Don’t plan your budget over the top of your head. It would not prove fruitful.

Instead, take out some time and plan as detailed budget as possible at the start of the month. And of course, stick to the budget, only creating it is useless.

Watch a video on how to plan your monthly budget effectively with a FREE budgeting sheet!


8) Make a Resolution to Follow Through with Your Resolutions

What’s the point in making the above-mentioned resolutions if you don’t carry through with them? So, after you are done making the above-mentioned resolutions, take one more step and make a resolution to stick with them.

Backing out of your diet-related resolutions or habit-related resolution might not have as far-reaching implications as backing out of your financial resolutions will. Financial health is the most important one and if you are financially secured, you can face life’s challenges head-on.

So, ensure that you follow through with your financial resolutions for your financial well-being.

Pro tip: Write out your resolutions and stick them somewhere where you are bound to glance at them every day. This would give you the necessary discipline to soldier on with the resolution for finance that you have made.

The year 2021 is round the corner and only you have the power to start the year on a positive note. Don’t blame the economy, the Government or the markets for your financial problems.

Instead, make these financial resolutions for 2021 and create solutions. None of the resolutions is difficult or impossible to inculcate. It all boils down to your motivation and dedication towards your finances.

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So, what would it be? A financially healthy year or a struggling one? Comment Below 👇