Hi ,
In this blog I have only reproduced one summary of common mistakes people make that are destroying their financial lives and depriving them of the pleasures and joy of life post achieving their Financial Freedom. It matches with my thinking and looks like a precis or summary of my 27 blogs which deal with these aspects at length. I do not know the author to acknowledge credit but thank him for his efforts in writing this
I am striving to get across these points and help those who join on my web site www.moneymonk.me but very few seem to sustain and reach the finish line due to some of these mistakes. Those who are continuing will reap the fruits of it in due course.
Please do read and reflect on them and make corrections where applicable to you.
Joe
Moneymonk
REPRODUCED ARTICLE BELOW
What are some of the mistakes of Indians that are destroying
their financial lives?
*Buying insurance policies for investment purpose*: Have you
invested your money in insurance plan to get a return in future? Big mistake!
Out of 100 people I have spoken, 95 have made this mistake.. Very few people
understand the difference between term plan, endowment plan, etc.
*Not able to crack the credit card mystery:* Are you paying
the minimum amout due on your credit card payment? If yes, you are trapped in
credit card mystery. On the other side, very few people really enjoy the
benefits like free lounge access, buy one get one movie ticket, etc.
*No idea about the power of compounding:* Everyone has come
across the formula of compounding but very few people really understand its
power. This is the reason people do not start saving early and hence lose out
on the power of compounding. Albert Einstein said that power of compounding is
the eighth wonder of the world.
*Buying stocks based on tips without any knowledge:* You
will find every Tom, Dick and Harry giving stock tips over Facebook, Whatsapp
and TV. Unfortunately, a lot of people fall in a trap of these people and
invest money without any knowledge. What is the end result? They lose
everything!
*Becoming a victim of lifestyle inflation*: Moving from 2bhk
to 3bhk just because you have got a good hike, upgrading your car because you
have got some bonus are some of the examples of lifestyle inflation destroying
financial lives.
*Buying things just because they are on discount*: From
Amazon’s “Great Indian Sale” to Flipkart’s “The Big Billion Days”, everyone is
encashing on the weakness of Indians buying things just because it is on
discount. Funny thing is now you will find such sales every other month.
*Getting tempted to go for an exotic vacation* just because
someone put a post on Facebook and Instagram: Instagram and Facebook are
introduced as Social Media Platform but they are actually destroying the entire
social fabric. Friends are jealous of each other. Most of them are just social
media friends. Facebook and Instagram are more of a marketing platform where
people post stuff just to get some likes and companies promote their product
and services.
*Spending a bomb on weekend parties:* 5 days work and 2 days
party: This is the new culture in India. Pubs are jam-packed on weekends where
people would spend a bomb on drinks. By the end of the month, they are left
with no money.
*No track of cash flow:* Very few people keep a track of
their expenses. Most of them just don’t know where the money is gone.
*No emergency budget:* Not having any extra money in the
case of an emergency results in embarrassing situations of borrowing money from
friends and relative. Some people even break their investments and make a big
mistake.
*No medical insurance*: I have seen people losing out the
lifetime savings just because they did not take medical insurance. One accident
can shatter all financial dreams. Better be insured. Healthcare cost is rising
and it is impossible to manage it without insurance.
*No financial plan:* People do not know why they need to
save money because they don’t know their financial goals.
*No diversification*: Some people would invest all their
money in real estate, some would invest all the money in gold, some would just
keep it in the locker, some would invest all the money in the stock market.
Very few people understand the right way of diversifying the investments.
*Spending all the hard earned money on children marriage:*
Thanks to our hypocritic society! People save their entire life just to spend
all the money on random relatives who only bother about the food and
arrangements. What is the topic of discussion at weddings? “Sharma ji ne to
unki beti ko car gift kari. (Mr Sharma has gifted a car to his daughter)”.
“Mehta ji ne unki beti ko 50 tola sona diya” (Mr Mehta has gifted 500-gram gold
to his daughter.)
*Buying excessive gold only to keep it in the locker:* Gold
worth lakhs is kept in lockers only to be used once or twice a year. This is
resulting in the money getting blocked and hence not getting any returns on it.
*An extremely conservative approach with investment:*
Traditionally, people have been risk-averse. They would just have an FD and
live on 6–7% annual interest. Some would just keep the cash at home.
*Lack of clarity between asset and liability:* Having a car
is not an asset because it consumes fuel and has a maintenance cost. Its price
will only depreciate in the future. Car is a necessity but people spend a lot
of money and even take the loan to buy a luxury car over and above their
budget.
*Considering frugal as cheap:* A lot of people confuse
economic spending with being cheap. An economic spender does not compromise
with quality but does his research well enough to buy the product or service at
the lowest rate.
*Procrastinating investment decisions:* “I will invest from
tomorrow”. But the problem is that tomorrow never comes.
*Spending a lot of money on fancy stuff:* A fancy car, a
fancy house, a fancy watch, a fancy vacation. People want fancy stuff and
willing to pay a premium irrespective of the value it generates.
*Lack of patience:* “I can’t wait for my wealth to grow. I
want to double my investments in 6 months. I need to invest in the stock
market.” A lot of people lose their lifetime of savings because they don’t have
the patience to understand the investment option and would blindly trust anyone
with their investment.
*Depending upon others for investment decisions:* “I don’t
know anything about investment. Please manage my money.” Unfortunately, a lot
of people are dependent upon others with their hard earned money. This is the reason
we have a lot of self-proclaimed experts giving stock market tips.
*Not discussing the money matters in the family:*
Discussions related to money are considered as a taboo in Indian families.
Nobody really discusses money matters.
*Getting too greedy with investment:* People blindly invest
their money in penny stocks, day trading, futures and options. They eventually
lose all their hard earned money. What is the root cause? GREED
*Wasting time on unproductive things:* Rather than learning
new stuff and growing the skillset, people end up wasting time on social media
and YouTube.
*Lack of disciplined investment:* Instead of spending what
is left after investing, people invest what is left after spending. This
results in indisciplined investment.
*Root Cause:* Lack of knowledge about personal financial
management!!
A real eye opener.. Give it a thought .
