Buying insurance
policies for investment purpose: Have you invested your money in insurance plan
to get a return in future? Big mistake! Out of 100 people I have spoken, 95
have made this mistake.. Very few people understand the difference between term
plan, endowment plan, etc.
Not able to crack the
credit card mystery: Are you paying the minimum amout due on your credit card
payment? If yes, you are trapped in credit card mystery. On the other side,
very few people really enjoy the benefits like free lounge access, buy one get
one movie ticket, etc.
No idea about the power
of compounding: Everyone has come across the formula of compounding but very
few people really understand its power. This is the reason people do not start
saving early and hence lose out on the power of compounding. Albert Einstein
said that power of compounding is the eighth wonder of the world.
Buying stocks based on
tips without any knowledge: You will find every Tom, Dick and Harry giving
stock tips over Facebook, Whatsapp and TV. Unfortunately, a lot of people fall
in a trap of these people and invest money without any knowledge. What is the
end result? They lose everything!
Becoming a victim of
lifestyle inflation: Moving from 2bhk to 3bhk just because you have got a good
hike, upgrading your car because you have got some bonus are some of the
examples of lifestyle inflation destroying financial lives.
Buying things just
because they are on discount: From Amazon’s “Great Indian Sale” to Flipkart’s
“The Big Billion Days”, everyone is encashing on the weakness of Indians buying
things just because it is on discount. Funny thing is now you will find such
sales every other month.
Getting tempted to go
for an exotic vacation : just because someone put a post on Facebook and
Instagram: Instagram and Facebook are introduced as Social Media Platform but
they are actually destroying the entire social fabric. Friends are jealous of
each other. Most of them are just social media friends. Facebook and Instagram
are more of a marketing platform where people post stuff just to get some likes
and companies promote their product and services.
Spending a bomb on
weekend parties: 5 days work and 2 days party: This is the new culture in
India. Pubs are jam-packed on weekends where people would spend a bomb on
drinks. By the end of the month, they are left with no money.
No track of cash flow:
Very few people keep a track of their expenses. Most of them just don’t know
where the money is gone.
No emergency budget: Not
having any extra money in the case of an emergency results in embarrassing
situations of borrowing money from friends and relative. Some people even break
their investments and make a big mistake.
No medical insurance: I
have seen people losing out the lifetime savings just because they did not take
medical insurance. One accident can shatter all financial dreams. Better be
insured. Healthcare cost is rising and it is impossible to manage it without
insurance.
No financial plan:
People do not know why they need to save money because they don’t know their
financial goals.
No diversification: Some
people would invest all their money in real estate, some would invest all the
money in gold, some would just keep it in the locker, some would invest all the
money in the stock market. Very few people understand the right way of
diversifying the investments.
Spending all the hard
earned money on children marriage: Thanks to our hypocritic society! People
save their entire life just to spend all the money on random relatives who only
bother about the food and arrangements. What is the topic of discussion at
weddings? “Sharma ji ne to unki beti ko car gift kari. (Mr Sharma has gifted a
car to his daughter)”. “Mehta ji ne unki beti ko 50 tola sona diya” (Mr Mehta
has gifted 500-gram gold to his daughter.)
Buying excessive gold
only to keep it in the locker: Gold worth lakhs is kept in lockers only to be
used once or twice a year. This is resulting in the money getting blocked and
hence not getting any returns on it.
An extremely
conservative approach with investment: Traditionally, people have been
risk-averse. They would just have an FD and live on 6–7% annual interest. Some
would just keep the cash at home.
Lack of clarity between
asset and liability: Having a car is not an asset because it consumes fuel and
has a maintenance cost. Its price will only depreciate in the future. Car is a
necessity but people spend a lot of money and even take the loan to buy a
luxury car over and above their budget.
Considering frugal as
cheap: A lot of people confuse economic spending with being cheap. An economic
spender does not compromise with quality but does his research well enough to
buy the product or service at the lowest rate.
Procrastinating
investment decisions: “I will invest from tomorrow”. But the problem is that
tomorrow never comes.
Spending a lot of money
on fancy stuff: A fancy car, a fancy house, a fancy watch, a fancy vacation.
People want fancy stuff and willing to pay a premium irrespective of the value
it generates.
Lack of patience: “I
can’t wait for my wealth to grow. I want to double my investments in 6 months.
I need to invest in the stock market.” A lot of people lose their lifetime of
savings because they don’t have the patience to understand the investment
option and would blindly trust anyone with their investment.
Depending upon others for investment decisions: “I don’t know anything about investment. Please manage my money.” Unfortunately, a lot of people are dependent upon others with their hard earned money. This is the reason we have a lot of self-proclaimed experts giving stock market tips.
Getting too greedy with
investment: People blindly invest their money in penny stocks, day trading,
futures and options. They eventually lose all their hard earned money. What is
the root cause? GREED
Lack of disciplined
investment: Instead of spending what is left after investing, people invest
what is left after spending. This results in indisciplined investment.
Root Cause: Lack of knowledge about personal financial management!
