One can never have a perfect financial life but you can at least try to make it a regret-free one. It goes without saying that financial planning is one of the integral steps in this path, but you must also be aware of how you are doing this. Let’s look at some of the common mistakes that people make in their financial journeys.
1. Buying Insurance Policies for Investment Purposes:
Insurance and investments serve different purposes. Avoid expecting returns from insurance. Pure-term insurance provides essential financial security to your beneficiaries after your death.
2. Not Able to Crack Credit Card Mystery:
If you’re only making minimum credit card payments, you’re caught in revolving debt, continuously paying 5% of your balance plus monthly interest. Few enjoy card perks like lounge access or free movie tickets.
3. No Idea about the Power of Compounding:
Many know the compounding formula, yet few grasp its true power. Compounding multiplies both earnings and interests, often realized too late, resulting in lower returns.
4. Buying Stocks based on Tips, without any knowledge:
People often receive convincing stock tips which they blindly follow it without research or knowledge, leading to significant losses.
5. Becoming a Victim of Lifestyle Inflation:
We often aim to improve our lifestyles, but excessive upgrades can lead to future financial remorse, such as moving from a 1 BHK to a 3 BHK for the same family size.
6. Buying things just because they are on Discount:
Consumers often succumb to sales tactics like Amazon’s ‘The Great Indian Sale’ or Flipkart’s ‘Big Billion Days.’ These promotions encourage excess spending even when it is not necessary, leading to substantial expenses.
7. Falling for exotic trips due to social media influence is common.
Facebook and Instagram, popular social platforms, are often used for sharing curated snapshots of lives, including luxurious trips. Viewing these posts may tempt us into costly vacations, leading to regrets.
8. Spending a considerable amount on weekend parties
In today’s work culture, weekends are often dedicated to costly parties and clubbing for relaxation, which can result in higher-than-expected expenses due to substantial spending on food and drinks.
9. No emergency budget
Establishing an emergency fund is vital for providing personal or family support during crises. It’s frequently overlooked as an essential investment, causing future financial difficulties.
10. No medical insurance
Costly health emergencies can deplete a person’s lifelong savings. Medical insurance is a valuable resource, covering the majority of medical expenses during such crises.
11. No financial plan
Many individuals lack a financial plan, leaving them struggling to finance their desires and objectives. Securing a financially sound future requires awareness of your goals and a well-defined plan.
12. Lack of clarity between asset and liability
Clarity about distinguishing between assets and liabilities is crucial for financial stability. A car, for instance, is not an asset; it generates expenses, not profits.
13. Procrastinating investment decisions
Investing is vital, and delaying it jeopardizes financial security. Many of us tend to put off investing by saying “I’ll do it tomorrow or next month,” leading to ongoing postponement.
14. Lack of Patience
Desiring swift profits often leads to errors. It’s crucial to acquire knowledge about investment and its options before anticipating significant returns.
15. Not discussing the money matters in the family
Even in the present day, some households don’t engage women in financial discussions and regard money matters as off-limits. This can lead to increased pressure on the primary earners.
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