As the new year begins, I wish everyone a very Happy New Year.
I am hoping that this year, I’ll make better financial decisions and hopefully people reading this will also do so. One good first step can be to avoid making bad financial decisions and keep improvising.
Here are some financial mistakes one can do well to avoid in 2019 (in no particular order):
- Spending more than what you earn. (Rule # 1 of personal finance!)
- Not investing the saved money, and letting it be idle in savings bank account or worse, as physical cash.
- Taking debt like personal loans or keeping credit card outstanding – consequently unsustainably living in present with your expected future income. (with an inflated cost, thanks to high interest rate!)
- Leveraging/ borrowing for speculating (speculations often masquerading as investments, e.g. speculating in stocks, or worse, derivatives, crypto currencies etc.)
- Not having a risk management plan. In other words, have a health insurance (must have) and term plan (if you have dependents).
- Chasing get rich quick schemes.(As a rule of thumb I view anyone offering over 12% per annum with suspicion. Evaluate things before jumping into it, especially if there is a financial commitment needed)
- Chasing a investment category because everyone else is chasing it.
- Taking claims at face value. (e.g. “assured” returns from stock markets, as brokers claim or buying the apartment you “deserve”, as the glossy brochures proclaim)
- Addiction – excess of alcohol, smoking, gambling (ideally, keep off them altogether!)
- Impulse buying to an extent that it drains your finances by month end.
- Not paying enough attention to your health. Cost is more than just financial.
- Being a signee/ loan applicant for someone else (You may not want to repent few months/ years down the line!)
- Jumping to buying home for “investment” by taking home loan soon after starting to earn. (It can constrain your flexibility & and keep burning hole in your pocket)
- Failing in basic budgeting and tax planning. (and wondering where the money goes!)
- Not having an emergency fund. (Have at least 6 months of emergency fund accessible to you)
- Lending money to friends, especially for frivolous expenses.
- Chasing the latest smartphone, bike, gadget, and so on. (see how easy it is to fall into lifestyle trap, and if your income doesn’t support this, into a debt trap
- Not having any financial goals (Corollary- groping in the dark as far as your investment philosophy and approach is concerned)
- Underestimating the power of inflation & not realizing the cost of living in future.
This list is mostly based upon my observations and readings.
Disagree with the list? Have anything more in mind? Do share :)
Wishing you a happy and healthy 2019 again!