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Sunday 22 March 2020

Most Common Personal Finance Sins

Everybody has some weakness when it comes to personal finances. Personal finance did not found any space in our school education system. The most Common Personal Finance Sins are :-

1] Do not have term insurance and Buying insurance policies for investment:-

There is a general myth that buying a term plan is waste of money. We will not get anything if we survive. Having a term insurance protects your loved ones in absence of you. This is the first financial mistake which you should avoid and have a adequate term insurance. It is a cost not an investment. Never mix insurance and investment. If we mixed them then we will miss the better protection and better return on our investment too. Traditional plans, pension plans, unit link insurance plans (ULIPs) have very low return, even lower than FD

2] My Company is providing health cover:-

Now days, every company gives health cover to their employees. Many people told me that I have company’s heath cover, why should I buy separate health insurance policy? The simple answer is “if you lost your job or change your job in between something uncertain illness happens to you or your family members, you will need to pay from your savings and investments.It is better to have separate health insurance along with top-up plan and personal accident policies.

3] Not planning on monthly expenses:-

Expenses reduction should be a goal and everyone should try to achieve it in their own way.It is old saying "money saved is money earned" . Saving the money means reserving the earned money for the future use. Debt is to use money now that have to be earned somewhere in the future. Debt and alcohol have in common that if one enjoy to much of it or get addicted, one gets in big trouble one way or an other.

4] Lack of emergency funds:-

One of the very first and important step of financial planning is to create an Emergency Fund. It is required to take care any unforeseen risks or unexpected and unplanned scenarios. It should not be used for meeting our routine or planned expenses. Without this long-term planning may fail. There could be a temporary job loss or medical emergency which can disturb your routine expenses. In these days we have our others commitment too.

5] Investing without goals:-

Goal gives us clarity for our vision and mission. We just invest without having any time horizon or goals. We should have our goals and their time fame. without these pointer we can choose right investment vehicle.   Without this pointers it cause over exposing to the risk and sometime pre-matured withdrawals. Investing to just save your taxes should not be only goal.

6] Free advise form Friend and relative:-

when it comes to health we prefer to go to professional with MBBS or MD and not taking medicine recommended on google but for wealth we like free advise either for friend/relative or Google/YouTube. Most of the time it cause the huge loss. we have to under stand the each of us have different risk profile. we have to choose the product according to this only. for this we need professional. So, hire professional unbiased registered investment advisor and financial planner, and more important he or she must has some personal experience in this.

7]  Not reviewing investment periodically:-

Ideally our risk profile changes day by day so we need to keep eye on our investment. the financial world changes very frequently so factors to choose one investment may change after some time so we also need to change our plan. This is the main reason to stay on proper path to reach our goal.

8] Not talking to our child on this:-

Personal finance did not found any space in our school education system. most of the our families don't want to discuss the money matters in-front of out children. Most of us also don't bother to know how our kids expend their pocket money. 

Hope this will help.....

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