In the following article I have elaborated certain mistakes that one does un-knowingly and ultimately leads to financial crises. Here are some of the reasons due to which a person is not able to save or invest.

1. CHOOSING WRONG INVESTMENTS 

MISTAKES CORRECTIONS
Keeping money in bank account, F.D., R.D. you might be wrong if your investment is not in same pace with inflation. Spread your allocation among debt, equity, real estate according to risk capacity.
If the money is easily available through bank account then you might freely use the amount. Invested instruments might be such whose return should beat the inflation.

The Greatest discipline in personal Finace

2. NO SET FINANCIAL GOALS 

MISTAKES CORRECTIONS
Working without budget & no plan for future spending for child marriage or retirement is not planned Setting of financial goals for both long & short term is must.
Upon arrival of such goals when you don’t have corpus then one need to take expensive loans. Even if the tenure is short do plan well time & amount as & when required, invest accordingly.

3. NON – AUTOMATION OF INVESTMENT 

MISTAKES CORRECTIONS
You are earning enough & have intention to save yet end up spending money. Automate your investment which means the amount you want to save shall be directly invested as salary is credited
Spending has become easy as the money is easily available through bank accounts or cards. Through E.C.S or SI (standing instructions) amount can be invested automatically which ensures saving before spending.

4. IMPULSE PURCHASES

MISTAKES CORRECTIONS
Running your household with out  budget, shopping with out list leads to impulsive buying. Setting your financial goals with specific value & time horizon & invest accordingly.
It might be online shopping or shopping at malls it only encourages spending habits Setting money aside for investment regularly will bring down impulsive purchases, which is not required.

the neighbourbhoo that we live determine

5. LOAN FINANCING 

MISTAKES CORRECTIONS
Financing through credit cards easy availability of personal, home , vehicle,loan leads people to debt financing. Remember all your Loan should not compromise of more than 50% of your total income.
People not only use this for full-filling needs but also fro their wants. The most expensive loans such as credit card debt, personal loans should be avoided at all.

6. THE SMALL FACTOR 

MISTAKES CORRECTIONS
Spending small amounts on insignificant things impact saving in a big way. This small spending would create large corpus over years. Identify your spending which are of no significant use & can be cut down.
If you invest Rs 500 per month for 20 years,return @12% would create a corpus of Rs 5 lakh. Fixing of an amount for such spending will limit our un-necessary spending.

7. TREATING WANTS AS NEEDS

MISTAKES CORRECTIONS
People fails to differentiate between wants & needs, when they get confuse they get very little to save or invest. Spread your allocation among debt, equity, real estate according to risk capacity.
NEEDS include Housing, Food, healthcare, utilities.  WANTS cover – travel, eating branded purchases. Invested instruments might be such whose return should beat the inflation.

8. BUYING DEPRECIATING ASSETS 

MISTAKES CORRECTIONS
Those assets which reduce in value over a period of time. This is what you are spending not investing. Buy an assets which grows in value over a period of time such as house gold stocks.
Putting money in cars, bikes, laptop, smartphones is not a smart purchase. Try not to take loan it just increases the cost of assets without contributing to individuals net worth.

Hope this article has highlighted common mistakes which will help in future planning for finances in terms of earning, spending & helps in saving money & creating a net worth by right investing.

Author Bio

Qualification: Graduate
Company: N/A
Location: AGRA, Uttar Pradesh, IN
Member Since: 24 Jul 2020 | Total Posts: 16
I have Cleared CA (intermediate) also cleared various series conducted by N.I.S.M (National Institute of Securities Market), Investment Advisory, Research Analyst, Merchant Banking & Retirement planning. Recently cleared exam of Independent Director conducted by IICA ( Indian Institute Of Corporate View Full Profile

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One Comment

  1. Shyam Haldankar says:

    Good article.Very practical approach.Your article is well researched other than the
    many CA’s who have only theoritical knowdledge.Totally useless in current situation.

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