Your current financial status is a result of your financial decisions you took over the years. It is indeed a material world, and you took them based on your experiences. A combination of good intentions and bad execution can also make you lose your wealth much faster.
Based on this, in most of the cases, it takes almost a lifetime to build significant wealth. This Dusshera, overcome 10 most common financial mistakes that eat into your savings:
One must remember to spend only as per their need and demand. If one keeps spending on whatever he wants and does not bother to check the need then it will never be too much. Your salary will not matter if your expenses are within your means. It is always advisable to have money in the bank account rather than shopping for things which are just an added expense to your pocket.
Life without Budget:
One of the governing factors behind frivolous spending is not having a proper budget plan. A monthly healthy budget plan will help you calculate and prioritise your expense for the whole month. Remember to plan a budget in such a way that it not only helps you spend on the necessities now but will also keep saving for your future.
Absence of Emergency Fund:
Any expense that happens unplanned needs an emergency fund to sail through. Always keep an eye on your savings accounts. The absence of an emergency fund will pull you down in your savings account and will push you to deeper debt.
No Insurance Coverage:
Insurance coverage is one of the main emergency funds that will see you through most of the emergencies. Insurance plans like medical insurance, endowment plans, life insurance, home insurance, to name a few, are investments that would help you in the long run. But it is also important that you take a balanced view and get insured for what you truly need.
Living on Borrowed Money:
In simple words, debt stinks. The more money you owe to the various channels, the more harm you are doing to your savings. The best bet is to clear off all the debts as fast as possible for a healthy savings account. Be cautious of your income and expenditure when applying for new debts.
Vicious EMI Cycle:
Today you want a villa in the posh locality, next month you aim to buy that high end SUV. The month later you are planning to go for an international vacation with the whole family, and so on. Stop before you run out of your means. Living a leaner lifestyle will go a long way in cushioning your financial worries.
Lured by Dubious Schemes:
Be wary of investing in dubious schemes, such schemes are too good to be true. Think twice as its just next to not possible to churn out 20-30% returns on a monthly basis. The promise of high returns should be an alarm ringing in the ears of investors. Mark all emails spam that claim that you have won a jackpot. Sticking to age old plans like fixed deposits, PPF and mutual funds are always a better and secure investment.
Life between Salary Credited Messages:
Yet again you have run out of balance at the end of the month and eagerly waiting for ‘salary credited’ message. This is definitely not the place you would like to envision yourself every month. Enjoy all the movie outings, dinners and drink get together, but in a proportionate manner. Enjoy your life, without compromising your future.
Ignoring Retirement Savings:
Many of us think retirement life is too far. So savings can be done later as well. It is never early to start savings. As you climb up the professional ladder, there would be many more things to look after. With life, financial priorities shift too. Plan your retirement savings now, so that you don’t have to think about multiple needs later in life.
Overconfident About Your Knowledge of Credit Cards:
“Answer to all my financial worries is credit card!” Think twice. Credit cards come at a price too. Though it comes handy during emergencies, the relief is only until the bill arrives. Once the bill is in your hands, be ready for a regular repayment. Miss one payment cycle and your credit score gets hit.
Suggested Reading: 7 Credit Card Rules Everyone Must Follow
Debt, bad credit score, dip in savings due to emergency and increased expenditure are just a handful of pitfalls that drill holes in your pockets. We all learn from our mistakes. When it comes to personal finance, the sooner we learn, the faster our future is more financially stable.