These Money Mistakes Can Keep You Poor
Hi guys, I hope you all are doing well.
If you have decided to read this post, I am sure you are highly concerned about your money and savings. I have heard people saying that earning money is not an easy task. Sometimes people have to work day and night just to fulfill the basic necessities of their family.
Even if people are able to earn money, it becomes difficult for many of them to retain or invest a portion of it.
In this post, I will try to cover most of the money mistakes that keeps an individual poor. In my previous posts, I have written about how you can retire in your 40s, and how a monthly SIP of Rs 6000 can give you Rs 17 crores. If you have not read them yet, the links are given as follows:
20 Money Mistakes That One Should Avoid
- Not keeping track of your money
Everyone knows how much they are earning but they are not aware of how much of their money goes to various expenses like food, travel, electricity, rent, food and groceries, clothes, subscriptions, etc.
This can be possible by keeping a record of every single penny. You can create your own Excel sheet, a notebook of expenses, or a daily expense app on your smartphone.
2. Not budgeting the money
Budgeting means allocating money to various expenses. For example, if you are earning Rs 1,000 how much of it should go to your investment and saving, and how much should go to daily needs?
Ideally, 50% of your monthly income should go to your household expenses, 30% on fun and activities, and the remaining 20% on Investments.
3. Heavy borrowing
In earlier times, people have to struggle a lot to get a personal loan. Several documents and ID proofs were required to complete the process of getting the credit amount. With the ease of credit cards, people have been indulging in impulsive buying. Think twice before applying for a loan application.
4. Delaying the investment
People have misconceptions that they are not earning a good amount. They believe that the right time to invest will be after the increase in salary. Due to this, they had already wasted a lot of their precious time. You can start your investment with as low as Rs 500 in monthly SIP. Starting an investment is the right decision especially when you are in your 20s.
5. Ignoring insurance
Insurance is very very important, especially for those whose parents are about to retire or already retired. Insurance is not just a tax-saving instrument, but rather a life-saving instrument that can help our loved ones during difficult times, especially the death of our loved ones for family members. Getting insurance between 25 and 30 years is a perfect decision because the yearly premiums are very low.
6. Considering insurance as an investment
ULIP and Term insurance are two completely different investment options. ULIPs might be lucrative, but they do not offer as many benefits as term insurance.
7. Ignoring emergency funds
You should have at least 6 months of emergency funds in your Bank savings account. An emergency fund is categorized as the funds that are utilized when an individual goes through a job loss. You can keep the emergency fund in the form of a fixed deposit or in a savings account. The objective is to protect rather than grow it.
8. Relying on the employer's insurance
Most of the people feel that the insurance provided by their employer is sufficient. Employer insurance has limited features. It might not cover your entire family. Sometimes your spouse might get covered but not your parents. The primary requirement of health insurance is for your parents because they are getting older day by day. Moreover, the chances of the hospitalization of your parents are much higher. Your employer's Health Insurance will expire once you leave the job. Hence, it becomes very important to have health insurance from a reputed insurance company.
9. Trading in futures and options
Day trading and futures and options are the riskiest of all the investments. They generally result in huge losses because returns on assets are highly unpredictable. You cannot predict or have a guarantee that an investment will give you a specific return on it. There is no prediction and the losses incurred generally result in people getting the loans.
10. Investing in rich overnight schemes
You must have heard that you will get double the amount in 45 or 60 days. If you are getting easy money then it is not going to sustain you for long. This means you will end up losing it the way you have earned it. You should focus on making money slowly and growing it at the pace of 10 to 20%. You should keep your risk level to the minimal point. Focus on long-term investing instead of quick get-rich schemes.
11. Investing despite having personal loans or credit card loans
Generally, the interest paid on personal loans or credit card loans is much higher than the return on the Investments. You should focus on paying off all the loans, especially the expensive loans instead of keeping the money just for an investment purpose. Once you get free from all types of loans only then you should start investing.
12. Buying a house under the pressure
You might experience pressure from your relatives or family members to purchase your own house even when you are in your late 20s or early 30s. Renting a house is much cheaper than buying your own house if you are still looking for a job change.
13. Underestimating expenses
You should have a good idea of all of your expenses and how they are going to grow in the future. Also, you must have an understanding of your short-term and long-term financial goals.
14. Losing the hope
Do not lose hope if you have so much of a financial burden on your shoulders. Everyone experiences a difficult time in their life when they feel that everything is over. Remember, bad days are not going to stay in your life forever.
I hope the above points are relevant and you have got valuable insights. You can comment on this post and I will respond to your query very soon.
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