1.Buying big house on loan
Buying a house is one of the biggest decision one makes in life. It is important not to go all in. Only buy what you need and not what society expects.
Buying a house which is out of budget can impact your next 10, 15, 20 years of your life. You would end up paying higher EMI for majority part of your life.
Having higher outstanding loan will give you lot of mental stress and anxiety the rest of your life. You should always buy house which you can easily pay for.
2. Buying a car even when you don’t need it
In the times of Ola and Uber, car is not a necessity. Buying a decent car can cost upwards of 10,00,00 rupees and if you combine the interest cost and maintenance the total amount would be far higher.
This is an expense that you can certainly avoid especially when you are in the beginning of your career.
3. Mixing Insurance and Investment
In India, the moment you get a job you will have some or the other relative who would try to sell you insurance. They will try to sell you Ulip or endowment policy which will pay them maximum commission rather than having your benefit at the Centre.
Just tell them that you already have a term life insurance and they will not bother you further.
A simple term life insurance is what you should buy for insurance. Don’t mix insurance and investment
4. Taking personal loans for spending.
t
Takking personal loans should only be limited for emergencies and not for your foreign holidays. Personal loans come at high interest rate and it should be avoided at all cost.
5.Not paying credit card bills
There are few reasons you should have credit cards. Enjoy the free credit limit, earn credit card reward points, to have a easy way to track your expenses.
Paying late fees and high interest cost is certainly not one of them.
Only buy things that you need and credit card should not be used for impulse buying. Certainly not to roll over your dues by making minimum payments. The interest rates are as high as 30% and can seriously dent your finances.
6.Not having an emergency fund.
I was having a conversation with a friend about the current pandemic and the impact on jobs. I asked a question of how long you can survive just on savings. The answer was about three months.
It is important to have enough money for emergencies and one should have at least six months worth of expenses saved in either savings account or fixed deposit. This should also include any EMI his outstanding dues that you have to pay the next six months. Key is emergency fund should be easily accessible.
When borrowing during emergency chances are you would end up paying high interest rates
7. Marrying a person not aligned with your financial goals.
In a society like India there are differences in financial condition in families. Some live a very frugal life due to weak finances
Some could leave a very affluent life with relatively less financial constraints. They would would happily spend money without much thought.
Marriage can bring to people with very opposite upbringing together. And incompatible thought process when it comes to finance could lead to load of disagreement in a marriage.
Make sure you align your financial goals with your would-be spouse so that you do not get into disagreements each decisions that impact your finances. Which is literally everything!
Remember,Indian marriages are especially expensive but the same thing goes for divorce as well.
8. Not making a will
It is the most common mistake made in India. No one makes a Will. Moveable and immovable property should be distributed fairly among children.
In the absence of a will the family members end up in dispute which doesn’t help with their mental and financial situation. Additionally, the division is then left to officials and lawyers which could be expensive.
Life is uncertain so it is important to make a will well before time so that you are not cause of mental pain for your children.
9.Not having enough insurance.
Insurance is a tricky thing. At times I look at my budget and look at the amount I am paying for insurances. I wonder if I pay too much for insurance.
Think of insurance as the safety net while performing trapeze. It saves you when you slip and fall.
Costs of everything is going up. Medical bills are unthinkable, cost of repairing your car in case of accident runs in thousands of rupees.
Sufficient insurance financially secures your family in case of uncertain events.
10. Timing the market when investing for long-term.
Here’s an interesting question – would you have invested whatever amount you could knowing markets would double in the next five years.
I’m sure the answer would be yes.
For example – I am talking about investing in the Sensex at 20,000 level knowing that it would reach 40,000 in about seven years.
The biggest mistake people make is to continuously drown themselves in information overload and not sticking to their investment goals.
I have seen this with so many people in Corona pandemic stock markets times. Everyone just wants to time the market, to be right at the edge when the market turns.
Trust me it is just like buying a lottery and the chances of getting it right is just the same.
While investing if the market goes up you will wait for correction. If it goes up again you will wait some more.
This constant cycle will prevent you from investing all together and in the end you will look back and be disappointed that you missed the bus.
You will say stock markets and investing is not for me.
What is not for you is trying to time the market.Keep it simple, invest a certain amount as per your investment goals every month.
Markets will behave Erratically but you behave insanely.
11.Not making the most out of your career.
Is the biggest asset that you have. Most of us make maximum almoney only through our salaries.
Now when you are investing you always look for maximum return but most people don’t try to increase return when it comes to your jobs.
You have to make plans continuously so that you can keep meaningful progress in your professional life. By meaningful meaningful progress I mean two things. One keep getting decent money which keeps growing. And to you do what you love and enjoy your professional life.
11.Overspending
I have had a decently long career. And I see most of my friends from college started out with similar salaries. Most of them have switched companies so with a decade-long career it’s safe to assume that they’re all earning decent salaries.
I still hear same comment from each one of them, Which is I don’t have money. It doesn’t matter if they were earning three lakhs per annum or 15,00,00 per annum, the situation remains the same.
The reason is most of them overspend. Which is they don’t save enough, they spend more then what they earn.
This is the biggest mistake anyone can make in trying to achieve financial goals. Because of this no matter how much you earn you will always end up zero saving . Even after having a 20 years of successful career you will still struggle to achieve financial freedom.
You have to create a budget and make sure you follow it.
12.Not setting a financial goal
This is the biggest in principle that I follow. If you don’t have a goal achieve nothing. You have to have a financial goal, it can be an amount of money, it can be to get out of debt or it can be save enough money to buy house.
Without having a goalpost you would not know how to place yourself financially and mentally. Both are key to achieve Finzaadi.
