Top 6 Financial mistakes and how to avoid them.

 

 To err is human. To correct it also human.

1. Spending too much.

At the end of the month, you notice that not much money is left for basic requirements, it means you are spending too much. The whole month you bought stuff to impress people, to show off, never wanted, no need things you will surely end up having a big hole in the pocket. Now, you decide that I will not do overspending next month but you did it again. You got broke in next month also. You are not able to figure out how it is happening?

Let's understand, the psychology behind overspending. 

You went to a store to buy biscuits. You are roaming inside the store searching for your biscuit and looking at the stuff which is not on your buying list. You saw a packet of new flavor noodles and instantly your heart says let's try this also. You took the packet and keep in your basket. Now, there an offer on cold drinks ''buy 1 get 1 free'', you think it's a great deal (already there are 5 bottles of cold drinks lying in your fridge). You take it and keep it in your basket. this way you bought 7 different things. You came to the store just to buy biscuits and ended up buying 7 things. Stores are constructed in a way that they lure us in buying more and our mind is also a greedy creature. 

How to control overspending

• stick on your buying list.
• don't keep extra cash with you.
• decrease your credit card limit.
• keep your budget tight
• avoid supermarkets and superstores.
• Do bargain
• buy for need not for wants

2.No budget for your expenditure and savings.

Not having a planned budget is like a ship without a captain. Sails anywhere in the vast ocean and end up sinking. Most people ignore budgeting because its time consuming, it's boring, it takes much effort to maintain. People also don't know how to maintain a monthly and yearly budget. They even dont have an idea where to start from. Budgeting will give you a broad idea about your income and expense. 

How to do budgeting

Take a piece of paper and mention the month of budgeting. Make two parts by drawing a line. One side write income and the second side write expenses.

Write down your incomes with a date like 

 

Salary, rental income, interest gains, dividends, etc. on the other side mark your grocery bills, mobile charges, travel expense, dining out, party, etc.

This will give a clear picture of our monthly financials.

 

3.Not planning for retirement.

When you are young and your blood is boiling and rushing through your veins, we don't care about the future very much. Everything seems immortal and powerful. But when time passes we come to know that everything is temporary and losing strength. You realize that after some years I will not be able to work anymore and anything that will help me is my planning at an early age. After reading this you will understand that how important is planning for retirement. Nothing will be left other than regret. 

How much money is required at the time of retirement?

From the current scenario of expense include inflation rate and you will come to know how much you will require at the time of retirement. You can use a retirement calculator available on the web Also, include medical expenses in it. As the age increases the expense of medical also increases. But maintaining a healthy lifestyle will help reduce expenses.

 

4.Not investing.

There are many investment options available in the market. Like, Gold, real estate, stocks, mutual funds. (FD and RD I don't consider as investment options). Not investing in any of the asset class you are making the biggest mistake in life. Not investing anywhere is riskier than investing. Because inflation will slowly-slowly eat up your purchasing power and decrease the value of money. 

By not investing you are ignoring the power of compounding, missing opportunities for wealth creation, unable to beat inflation.

 

How to do it?

Start early as possible. You can plan your investment yourself or contact a financial advisor. Sit with him make a plan. Decide goal. Invest according to your risk appetite. Never become greedy. Let compounding do work for you. Invest regularly. Keep on increasing the amount every year. Be disciplined, Do asset allocation.

 

5.Underestimating financial risks

Your assets are depreciating, you should be aware of that. Like your car, bike, house, gadgets. If you have a car and you use it once a month, pending maintenance of your house, not making use of acquired land, not paying loans early, credit card payments pending. All these are the financial risk that arises because of ignorance. 

 

If you don't use your car often it requires maintenance, which will be way higher than your ride. Sell it and encash it and park the money elsewhere. Pending maintenance of your house is a financial risk and also a risk for life. Do it as soon as possible ignoring it can be dangerous. Making a structure on acquired land will increase the value of investment. Credit card due bills will end up in paying in interest. Not paying off your loans early will take away more interest from you. Early paying will reward you in less interest payment.

 

6.Not learning from other's mistakes.

You ofter heard about people doing mistakes and if you keep repeating it is not a good practice. We should be aware of these kinds of things. We can learn from other people's mistakes and we can share our mistakes too. It will be really helpful. Each day brings new opportunities and new learnings. Doing the same mistake, again and again, is sin. make sure you are not getting into a financial trap. 

 

Conclusion

To err is human. Nobody is perfect. We should correct them and move on. There are a lot of indicators that show the results. Never ignore them. Be open to learning new things. Take a calculated risk.

 

Do mistakes but correct them ASAP. 

 

Hope you learned something new. Please comment your mistake and how you corrected them.