1] Do not have term insurance:-
There is a general myth that buying a term plan is wasting of money. Term plan is a necessity in today’s hectic life style. Job pressures, targets and working times leads to unhealthy life style. We can see abnormal deaths in mid 30s and 40s age groups. 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.
2] Company is providing heath cover:-
Now days, almost every company covers their employees based on their internal grades. Many people told me that I have company’s heath cover, why should I buy separate health insurance policy? The simple answer is “Job Lost” or “Change of Job”. 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. You might save some money for your goals but in absence of health insurance cover, part of or all your investment use in hospital payments. This leads to suffer your goals and aspiration. It is recommend to have separate health insurance along with super top-up plan and personal accident policies.
3] Buying insurance policies for investment:-
People consider insurance plans as a investment tool which is a biggest mistake. Never mix insurance and investment together because you will not have enough life insurance coverage and proper returns. As insurance plans like traditions plans, pension plans, unit link insurance plans (ULIPs) are loaded with heavy charges which erode your return. Buy a term plan and investment in mutual funds for better returns or book fixed deposits for fixed returns.
4] Not focusing on monthly expenses:-
Many salaried people always in a complaint mode that they have not enough surplus to invest. The main reason is not proper cash flow planning. Buying a same product just it is “Grand Sale” or”Big Discount Day” is madness. By focusing on your expenses, you can minimise unnecessary spending.
5] Use of credit cards:
”Spend today, Pay Later” is the biggest trap in credit cards. To have credit card and use it only if you are in position to pay credit card bill after 50 days. If you keep on buying and convert the outstanding amounts into EMIs is s foolishness because you are paying 16% to 28% interest.
6] Lack of emergency funds:-
You do have control on life’s uncertainties like job loss or family emergency etc; but you can try to immune your finance by farsighted. To have emergency funds is the best way to deal such uncertainties. Ideally, you should have 3-6 months expenses in bank account as emergency funds. Make sure you park your emergency funds in such a instruments from which you can liquidate any time you want.
7] Savings & Investing without predefined goals:-
Goal gives you clarity. Many people just invest without having any time horizon or goals. Priorities your savings and investments into short, medium and long term life stages goals. It helps you to streamline your investments once you defined goals. Without goal based investment create confusion and pre-matured withdrawals which ultimately creates indiscipline in your personal finance. Investing to just save your taxes should not be your goal.
8] Relying on friends or relatives or open source of advise:
You can have plenty of investment tips and advises through lot of mediums. Many times you act on these information and suffers losses. The answer is simple; you are not taking medicines by searching on google or asking friends and relatives because you know each one have different heath parameters then why you taking chances in your investments? Each one has different risk taking level i.s risk appetite, financial conditions, investment time horizon, objectives and goals. Each one’s investment options and instrument will be different. So, hire professional unbised registered investment advisor and financial planner.
9] To put all eggs in one basket:-
I have seen many people put all their money in one asset class. For example, buying only real estate is a myth and which leads to liquidity issues. Putting all money in fixed deposits kind of instruments gives you below or at par inflationary returns. Diversification is a key to have sound investment portfolio.
10] Do not have customised financial life plan:-
You should have your financial life plan which gives you roadmap in your financial journey. Financial Life Plan is your full fledge savings, investments, goals, income-expenses, insurance information which shows the clear picture of current finance status and future journey. This helps you in same way like when you travel and uses maps and navigation to reach your destination. Have you ever thought that you are earning and investment but what is the ultimate purpose of these? How much you will need when you retire? Why you are facing cash crunches before end of month? What are your discretionary and non-discretionary expenses? Do you have enough money if something happens to you, to feed your family needs and life style? These are some eye opener questions which you need to ask yourself. Having customised financial life plan helps you to overcome these questions and ambiguities.
11] Not reviewing your personal finance periodically:-
When you create a pathway through customised financial life plan and made proper implementation, it is highly recommend reviewing all decisions periodically to stay on predefined voyage. The world in dynamic and market scenarios, government policies and external factors are changes frequently. What you implement today based on today’s factors may change after next year. This is the main reason to stay on proper way to reach your objectives.