This article contains some commonly found mistakes while one does in his/her financial planning. Let us know some of them, evaluate ourselves & try not to repeat these mistakes in future so that we may save our money by not spending rather than earning.
Some of them are listed below-
♦ MANAGING INCOME / EXPENSES
People are not able to maintain the balance between their Income & Expenses, as their income rise there is a proportionate rise in expenses. They should make a budget & do follow it accordingly.
♦ CREDIT CARD PURCHASES
Many people make purchases through credit cards but they are not aware about the charges it brings along, on the failure on non payment attracts interest charges of 3-4% along with the downfall in the credit score of an individual.
♦ OLD INVESTING MODES
Most of us are not aware about the new modes of investing, we still go with the old route i.e. Bank FD, now with the change in the financial markets people should start investing with the new avenues of Investing also.
♦ GOLD INVESTMENTS
Gold considered as one of the most crucial asset in our society, so people keep stock of gold in physical form rather than going for online investing in gold. This online platform also invest in gold through stock market and eliminates physical safety of gold. As investment is done through online mode or purchase in demat Account.
♦ SPENDING ON GADGETS
People are spending money on costly gadgets such as smart phones , smart watches, laptops/tablets which are capable of doing regular work but are at higher cost. Just to show off people spend much more than actually required to spend then replace them with new gadget as the updated version is available in the market.
♦ INSURANCE AS INVESTMENT
People consider insurance as an investment vehicle which also gives tax advantage to policy covered under section 80c of income tax, so people takes up insurance for this dual benefit rather than considering the main purpose of the policy that is insuring their life in unforeseen circumstances.
♦ NO PROPER PLANNING
Taking up loans for unplanned expenses then paying E.M.I of such loan eats up a major part of the income, as E.M.I payment is compulsory so the person needs cut out his expenses accordingly
♦ NO FINANCIAL PLAN
People spend what they earn without any Predefined Goal or purpose & end up with no money at the required time & take up loans. As the person had not list out his goals & time at which the goal matures he/ she does not have the amount required in the future. This disturbs the income flow as there was No Financial Plan, a proper budget considering inflation, as people do not plan for upcoming future.
♦ EMERGENCY FUNDS
Most of the people focus on earning money rather than managing it in such manner that they have amount at the required time, people do invest their money but they fail to keep funds in case of uncertainty. Emergency funds require to have liquidity so that they are easily available.
♦ Maintaining Bank Balance
Many of us often fails to maintain minimum bank balance in our saving account which attracts charges which are deducted from our account, if not maintained monthly basis charges are continuously levied.
♦ Product Offering
Often when people buy investment, they are more interested in what does the product offers in return, rather than seeing that whether the product is beneficial to them or is serving our purpose of investment.
♦ Professional Advice
A common mistake that most of us do is by not taking the advice of a financial expert, who can by his knowledge & experience advice us to invest in those product which are of benefit to us, people on their own invest directly without knowing the pros & corns of investment & build-up a “fear of loss in them”.
♦ Unnecessary Spending Of Money
We spend our money even when it is not required such offers we get are attractive but they require outflow of money more than the budgeted amount such as BUY TWO GET ONE FREE, BEING BRAND CONSCIOUS, PAYING FOR 200 CHANNELS ON DISH TV WATCHING ONLY 10 OF THEM. We ourselves get into this trap & thus do not have the cash flow at required time.
♦ Wastage of Money
Buying of extended warranties, Purchasing of SUV’s & burning more fuel, Having junk food on weekly basis, Buying of luxuries homes which are out of budget , these are common example of simple waste of money where people spend without thinking.
♦ RISK / TAX / TRUST
After knowing the Risk & the Tax factor people fall out from investing, as they don’t want to take risk with their money & as investing also attracts taxation ( long/ short term) most of the people who don’t want to pay taxes drops themselves out from investing. To TRUST the stock market is the last thing that an investor shall do.