The real money problem is not how much you make, it's how you manage it and most people do it in the wrong way. Research reports say people spent more than 90% time on how to earn and hardly 10% on managing money thereafter. Even if you have a huge cash inflow and you don’t know what to do with those earnings, it makes no sense.
In personal finance, if you don't fully understand how to manage your money, you could be at risk of making a lot of financial mistakes. Financial mistakes could be difficult to clean once made and generally cost huge. Avoiding costly money mistakes/blunders can save you money, time, energy, efforts, and reduce stress, anxiety. There is a whole host of mistakes/blunders people make with their finances and should be avoided.
- Not having a financial plan in writing
- Investing without knowing a financial goal
- Going without insurance or under-insurance
- Buying insurance for investment purpose
- Not understanding your cash flow & living without a budget
- Procrastination / start very late / waiting on the sideline to invest
- Not knowing your risk tolerance
- Riding on the wrong vehicle / selecting a product without doing proper due diligence
- Don’t consider inflation
- Timing the market
- Monitoring your portfolio frequently
- Lack of patience
- Extreme conservative approach towards investments
- Forget to rebalance asset allocation at regular interval
- Stop investing in SIP when the market is down
- Reshuffling your investment too often / excessive trading
- Panic exit
- Rely on unreliable information / tips / news channel
- buying a stock without any knowledge
- Putting all your eggs into one basket (non-diversification)
- Don’t teach your kids about money management / financial education
- Didn’t financially prepare for the birth of a child / went into debt for wedding / saving for children but not for yourself
- Didn’t save adequately for retirement at the start of my career / using retirement funds to pay for children college fee or marriage
- Not saving enough - Not investing enough - No emergency fund
- Leverage - living on borrowed money from friends & family. Too much lending & borrowing
- Overspending / impulsive buying/living beyond your means / bought something you don’t even use
- Ignoring credit score by CIBIL
- Don't know how to use a credit card for the benefit. Poor credit card habits / bought very expensive things with a credit card and without savings
- Buying an expensive house / Buying too many houses
- Rush for buying a new costly car
- Lost money in gambling/speculation
- Hung out with a high-spending social group
- Not working to maximize your career growth / personal development skills
- Don't make budget & monitor cashflow
- Underestimate the power of compounding
- Lack of clarity between asset & liability
- Decision based on emotions
- Wasting time on unproductive things
- Lack of financial literacy
- Don’t consult Certified Financial Planner
Some of these above mistakes are big & blunder, and some are obvious. Even if you think you aren’t making any mistakes, you might be wrong. Therefore, try to fix it one by one and don’t think how it would have been if you have started a decade ago. Important is to start today and visualize how it would be a decade from now.
We hope that by making you aware of these pitfalls, you'll be able to avoid them and live a financially fit lifestyle that leads to financial freedom. Remember, the worst financial decisions end up regretting later.
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