Are you ruining your chances of a secure financial future? Here’s a list of financial decisions that could lead to your financial downfall.
Life is full of choices. Each choice you make can either prove to be beneficial or take you down a rocky road. Like everything else, this concept applies to your money matters as well. No matter how smart you are about planning your finances, you are bound to make one or two (or even more) financial mistakes at some point.
It could be anything from not thinking about your savings and sticking only to your Savings Account. You could be missing out on exploring better ways to save up for emergencies like Recurring Deposits or Fixed Deposits. Or maybe you’re too lazy to invest in an SIP or any other investment scheme for that matter.
Most of the time, you’re probably not even aware that you’re making these mistakes. Being oblivious to these, sadly, doesn’t help. You’re going to get into trouble sooner or later anyway. We can’t change the way you think, but we can surely list a few of these financial decisions that cost you more than you think.
Additional Reading: 4 Time-Tested Advantages Of Investing Over Saving
Budgeting? Nah, I’m Too Cool For That!
If you consider budgeting to be an unnecessary, time-consuming exercise, you have no idea where your financial life is headed. We can tell you one thing, it’s not going in the right direction. It’s high time you stop spending mindlessly and get your act together.
The first part of doing that is getting your numbers game right. No matter how much you hate it, you need to do a few calculations. It might sound a bit tedious, but it’s the only way to get your finances in place. The way you spend your money can either take you closer towards your dreams or push you into debt.
So instead of pushing your financial security down the drain, it’s better to get a pen and paper and do some math. Going step-by-step can help you manage your money better and brighten your financial future.
Additional Reading: 4 Budgeting Ideas For The Self-Employed
Don’t postpone budgeting any further. If you think it’s too cumbersome to actually sit and do the calculations on a sheet of paper, our mobile app can simplify things for you. BankBazaar’s mobile app lets you keep a track of your monthly expenses in an organised manner, thus ensuring that you never mess/miss anything.
All Insurance Covers Are The Same
Getting adequate insurance cover should be a top priority. But what is more crucial is the type of cover you opt for. Every insurance plan is not the same. If your friend gets a particular plan because it makes sense to him or her, it doesn’t necessarily mean that it will suit you as well.
Think twice before investing in an insurance product. Analyse your needs, your income, and your prior financial commitments and look for a product accordingly. If you are still unsure about which plan to opt for, you must consult an expert. Usually, insurance companies have well-crafted plans to suit the different needs of individuals and families.
If you think insurance is just a mere way to save tax, you’re wrong. Sure, it does contribute to tax-saving but that doesn’t make it ‘just’ another tax-saving instrument.
Comfortable EMIs? Of Course
Let us assume that you have a Home Loan of Rs. 20 lakhs at 10% interest. The lender says that you can opt for a tenure of 30 years and enjoy a comfortable EMI of Rs. 17,551. If you choose 20 years, the EMI would be Rs. 19,300. It’s quite natural for you to go for a lower EMI to make the monthly payments comfortable.
Additional Reading: What Is EMI And How Is It Computed?
If you’re thinking on these lines, it’s time to change. When choosing a 30-year tenure, for example, you are paying back approximately Rs. 63 lakhs. If you choose a tenure of 20 years, the repayment comes to around Rs. 46 lakhs.
Just for a meagre relief of Rs. 1,749 every month, you are paying close to Rs. 17 lakhs additionally! So remember, the longer the loan tenure, the smaller the monthly EMI, but you end up paying a higher amount against the loan. Keep this in mind and make smart decisions in future.
Real Estate Is The King
Indians traditionally have a soft corner for real estate investments. If someone has a decent number of plots and apartments/houses, they are generally said to be well-settled financially. Because of this mentality, many people invest in real estate with the aim to become a millionaire overnight. However, anything in excess is bad, and this applies to investing in real estate as well.
It is true that real estate appreciates in value over time, but the sale of your properties may not happen as easily as you think. If you happen to fall victim to any land disputes or real estate scams, a good amount of your hard-earned money gets parked with no liquidity.
So, better follow the golden rule of investments— never put all your eggs in one basket. While the basket of real estate investment is a good option, over indulgence could lead to financial distress.
Paying Light? Think Again!
No matter how much you love that latest HD OLED Television, you must learn how to resist temptation. Just because you have a Credit Card with a high credit limit doesn’t mean you can swipe now and worry about making payments later. Of course, it also doesn’t mean that you shouldn’t use your plastic buddy at all. It just means that you need to be careful instead of becoming a Credit Card swiping ninja.
Credit Cards are meant to let you enjoy the benefits of being able to avail credit. But you must not go overboard with the swiping. Remember, you are the one who’s going to get the shock of your life seeing that humongous bill. It’s better you plan your purchases and time them better. Instead of making two or more super heavy purchases using your plastic mate, it’s better to time them carefully. No matter how tempting that EMI offer sounds, stop for a while and think if you really need to make this purchase right now. This analytical behaviour will help ward off all the unnecessary financial trouble you could possibly be heading towards (knowingly or unknowingly).
Credit Card interest rates are quite high as well (we’re sure you know that). Limit yourself from using your plastic buddy to make all those day-to-day purchases. Before you even realise, the interest rate will slowly eat up a big chunk of your monthly salary and all you’ll be left with will be peanuts. Unless you love to force instant noodles down your throat everyday (since you won’t be able to afford real food), don’t take the risk of exploiting your Credit Card.
Additional Reading: Massage Your Ego With A Credit Card
By now, we’re sure you have a clear idea about your financial habits and how good/bad they are. Most people fail to see how these decisions slowly affect and damage their finances.
If you are struggling with money management, don’t worry! We have solutions for all your financial worries. All you need to do is download the BankBazaar mobile app and take charge of your finances.