It is so interesting as well as concerning that people across the globe irrespective of their background seem to make a few common mistakes in the basics of Personal Finance.
1.Inadequate insurance cover
This is a very common mistake. The importance of insurance is well known. While on the subject of insurance, many do not take adequate medical insurance cover. Both life and medical insurance cover for adequate sums are very vital and best do take care of this at a young age.
2.Delaying investment
When one delays investment it means that he is challenging the ‘Power of Compounding’, which is considered the eighth wonder!!
3.Ignoring the impact of inflation
Inflation is a challenge, which cannot be wished away. There are many examples of people not taking calculated risk, of course with proper guidance. They end up getting negative return on their investments.
4.Going overboard in high risk investments
Many seem to go overboard in equity market without proper guidance. They seem to rely on hot tips and gossips. When they lose money, they blame the equity market. For many people, timing the market is difficult and hence better to take the route of Systematic Investment Planning (SIP) route given by Mutual Funds.
5.Excessive use of credit cards
Credit card is a very useful tool but is also a double-edged sword. The misuse and excessive use of credit cards has landed millions of people across the globe in debt-trap.
6.Ignoring simple tax saving opportunities
There are wonderful tax-saving investments in many countries. For example in India, tools like PPF, ELSS and NSC are available. Many seem to miss out on these opportunities to reduce tax outflow.
7.Not planning for children education
The cost of education is going up more than inflation rate. One needs to plan for this virtually from the birth of children.
8.Neglecting retirement planning
Many seem to think that they need to plan for retirement only after 40 or 50. In fact, retirement planning carried out from a young age with discipline gives huge rewards.
Even if you are making some of the above mistakes, do not lose heart; you can make a new beginning from NOW. You can decide to learn from the past and create better and happy ways to be Rich. You owe this to yourself and to your family!
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