Financial is nothing more than proper management of resources at hand for a better and a prosperous future. One can take slow and steady steps and yet become a millionaire whereas someone can move fast, break things and end up with nothing. Financial planning takes a lot of education, a bit of experience and huge dedication; you can never be the master if you are not upgrading yourself with the latest developments. Common financial mistakes people make includes of over spending, investing in unknown products and following other people.
While people here in India consider life insurances to be the best investment tool, there’s certainly something they are missing onto. Life insurance policies are good, important and fruitful but it should never be your only investment. Depending fully upon Life Insurance Policies is one of the most common financial mistakes people make.
Trying to make fruits in the early stage: Financial Management is more about planning and less about gambling. You are not going to make profits from the very first day; first few days—even years—are all about learning, discovering and understanding how the market works. Anyone who guarantees you great profit within months is either lying or playing with you.
Buying Assets you cannot afford: Acquiring Assets is only way to riches, you cannot keep buying liabilities and think of yourself as rich. Acquire assets and manage your balance sheets. While buying assets is a right move but acquiring assets out of your purchasing capacity is a blunder. Do not buy something that puts your under debt for the meanwhile even when it is bound to generate greater returns in the longer term because the growing interest rate will beat the return rate of interest.
Buying a product just because it is attractive: Policies be it from Life Insurance Corporation of India or HDFC, you should buy them only when you need them or only when you can afford them. A policy that generates a return of 10 Crore is certainly Attractive and Lucrative but it is not affordable. Do not go into debt for these attractive returns. One of the best ways of managing personal finance is to remain out of Debt. It is one of the most repeated common financial mistakes among the Indian Youth.
People believe in implementing instead of learning: Well! It is okay to open a PPF Account, buy a Term Plan and also invest in FD and RD but one needs to be patient when it comes to share market or mutual funds. Mutual Funds and Share Market are highly risky investment tools; one needs to understand the business intricately before investing. Spend few months reading books, newspaper or get in touch with an experienced Persona Finance Planner. This is one of the few common financial mistakes that can put your life, savings and happiness on road hence be very careful.
Not adding variety to your Portfolio: Your Personal Financial Portfolio should always be diverse in nature. Having an immaculate combination of Debt, Equity, Risky and Non-Risky investments is the key to happiness.
Here’s how a personal finance portfolio should look like:
- Insurance Policy: For tackling risks and providing for your family in your absence.
- EPF or PPF Account: EPF And PPF are the best investment tools for retirement planning. A salaried employee can take both whereas self employed or non-employed people can only have PPF Accounts. They are government backed hence very much reliable.
- Mutual Funds: Investing in Mutual Funds through SIP or Lump Sump can help people achieve major life goals, like buying a house, car, children’s education and daughter’s marriage. In the long run return on investment by Mutual Fund beats the return on investment generated by Real Estates.
These are some of the common financial mistakes every millennial should stop making at the earliest. Personal finance is no rocket science; all it takes is proper understanding of needs, life goals and investing power. We hope you have enough courage to avoid these common financial mistakes and lead a happy life.