11 Worst Money Moves That Can Ruin Your Financial Future
- 4 Min Read
- By Taxmann
- Last Updated on 2 March, 2022
1. Spending First, Saving Later
Mostly, people save only when they are left with money after meeting their expenses. It means, during those months when their expenses are more than their spending, they would have nothing to save. To combat this issue, carefully define the amount you would like to save every month and then create a budget with the remaining amount. Saving is not about living miserably as it’s just about living within your means.
2. Saving without Investing
For most of the people, savings often involves around putting a lot of money in bank accounts. However, to create a financially secure future, it is necessary for your savings to grow, which is feasible only by making proper investments.
3. Delaying Investing
We keep delaying our investment plans in the hope that one day we will accumulate enough money to start our investment. However, this is a fallacy. Thanks to the power of compounding, an investment of an amount as small as Rs 500 can produce a big corpus for you in the future. Consider this, if at the age of 30, you start investing Rs 5,000/month, you will have nearly Rs 21 lakhs at the age of 45, assuming 10% interest rate. However, if you start investing from the age of 25, you will accumulate nearly Rs 38 lakh by the age of 45, at the same interest rate. The time gap of five years can prove costly to you, as seen in the below image! So, start investing now and let the power of compounding show its magic.
4. Ignoring Term Insurance
As term insurance doesn’t come with maturity benefits, most people ignore buying term insurance when they come to know that there is no maturity amount. However, your family would have to go through tough times in meeting various expenses, including household, medical and loan EMIs, in case of your sudden demise. Therefore, it is essential to purchase term insurance. Further, some insurers also make a payout if the policyholder is diagnosed with a critical illness. Before buying term insurance online, you can use the term insurance calculator online to compute the correct sum assured and premium accordingly. Just enter a few details about yourself, and a term insurance calculator would compute the apt coverage for you.
5. Relying Only on Corporate Health Insurance
6. Not Reviewing Investments Periodically
It is imperative to review the investment portfolio to ensure it is in sync with the current (or new) circumstances. Also, the periodic review of investments is necessary to secure the investments from market fluctuations by taking immediate steps.
7. Blindly Following Herd Mentality
Single, married, divorcee, under 50, over 60, male, female, what difference does it make? A good and sound financial advice will always be good for everyone, isn’t it? Financial advice doesn’t follow ‘one-size-fits-all’ proposition. Singles have different risks than the married couples. So instead of blindly following the generic advice, analyse your current requirements and devise a financial plan in accordance with your life goals.
8. Taking Debt Without Evaluating Repayment Capacity
9. Ignoring Inflation
Assuming inflation at 7%, you would have to spend nearly Rs 38,000 for an item after 30 years which may cost you Rs 5,000 today. It means you will able to purchase less with the same amount of money. Therefore, it is essential to plan your investment portfolio in such manner that it generates returns which are high enough to beat the inflation impact.
10. Focusing on tax-planning only
In a bid to save tax, most of the people overlook returns offered by investment options and give importance to tax benefits only. Though this way can help them in saving tax, they would have to incur losses in the long run when their investments would not generate high returns. So instead of focusing only on tax benefits, look for features like past performance of the investment, returns, etc.; before going ahead.
11. Delaying Retirement Planning
As the journey of a thousand miles begins with a single step, so take the cue from the above list and start your journey towards a secure and comfortable financial future.
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