As “We” Indians are full of emotions so we generally make our decisions, almost regarding everything, on the basis of our emotions. It’s good to include emotions while making decisions relating to our family matters but it is very harmful to include emotions while taking decisions regarding other important affairs such as financial planning, professional decisions, and other career or future strategies planning. If you would like to get successful in your life, especially in your career and financial life never do these common mistakes elaborated in this FactFile.
In this FactFile, we are going to include all those most common mistakes that Indian people generally make regarding their financial life while taking financial decisions and during financial strategies. In this FactFile post, we gathered the top 22 most common financial mistakes that generally Indians make. Go through it so you can take care of these most common financial mistakes while planning your financial goals. If you find it useful please share it with your loved ones so they can also be benefited from this fact file.
FactFile: Top 22 Most Common Financial Mistakes Indians make
1.Buying insurance policies for investment purpose:
Have you invested your money in an insurance plan to get a return in the future? Big mistake! Out of 100 people, about 90 Indians have made this mistake. Very few people understand the difference between term plan and endowment plan, etc. In most of the cases, Insurance policy agents spread wrong information and they never disclose the real facts so they can sell their insurance policies to those people who even do not need those insurance policies.
2.Not able to crack the credit card mystery:
I have a friend who earns Rs.30,000 and spends lavishly with a credit card. He buys expensive stuff just because it is on OFFER. By the end of the month, he calls other friends for money to pay the debt. That’s utter stupidity. When I ask him, he says he is living life. This is one of the most common financial mistakes Indians often make.
Think about it, why do credit card companies exist? It’s not because of people who use credit cards carefully, it’s because of those who spend more than they can afford and end up paying huge interest. Are you paying the minimum about due on your credit card payment? Is yes, you are trapped in credit card mystery.
3. No idea about the power of compounding:
Everyone studied the formula of compounding but actually very few people 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.”
4. Finance studies are not included in School’s/Collage’s Syllabus:
No Indian school/collages don’t include finance studies in their general syllabus. Students are only taught on mugging up concepts and brainwashed in securing a good job rather than preparing them for facing real life situations. They are not even taught the basics of financial facts, entrepreneurship, how to make and save, financial planning etc.
5. Fixation with Gold and Real estate:
Let’s accept it, we Indians love Gold and Real estate. There’s nothing wrong in investing in land and precious metals. Except one needs to refrain from putting all his money in one single asset class. I have seen countless people running into tremendous losses just because all they owned was land. Have a well-diversified portfolio of assets and you’ll never regret it.
6.Buying stocks based on tips without any knowledge:
You will find many experts giving stock tips over Facebook, Whatsapp, and youtube. Unfortunately, a lot of people fall in a trap of these people and invest money without any factual knowledge. What is the end result? They lose everything! Firstly, learn a skill from a genuine source only then start trading in stocks.
7. Becoming a victim of lifestyle inflation:
Moving from 1bhk to 2bhk just because you have got a good hike or upgrading your car because you have got some bonus are some of the examples of lifestyle inflation destroying financial lives. Buying fancy things not because of their use but only to showoff others that I have these things. Indian people often do this type of financial mistakes.
8. Buying things just because they are on discount:
From Amazon’s “Great Indian Sale” to Flipkart’s “The Big Billion Days”, everyone is cashing 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. The fact is that they are only to grow their sales.
9. Not maintaining a budget:
One of the most common financial mistakes Indians generally make is that very few people keep a track of their expenses. Most of them just don’t know where the money is going.
10. No emergency budget:
Not having any extra money in the case of emergency results in embarrassing situations of borrowing money from friends and relatives. Some people even break their investments and make a big mistake.
11. Having 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.
12. No financial plan:
People do not know the facts about why they need to save money because they don’t know their financial goals.
13. 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.
14. Spending on a grand wedding to exhibit your status:
People save their entire lives just to spend all the money on random relatives who only bother about the food and arrangements. Another one of the financial disasters is this. Whom are we trying to showcase is unclear. But if every couple could save this big one time spend, they all can be off to a great start to their financial journey post wedding.
15. 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 blockage and hence not getting any returns on it.
16. An extremely conservative approach with investment:
Traditionally, people have been risk-averse. They would just have an FD and live on a 6–7% annual interest. Some would just keep the cash at home.
17. 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.
18. Considering frugal as cheap:
A lot of people confuse economic spending by 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.
19. Spending a lot of money on fancy stuff:
A fancy car, a fancy house, a fancy watch or a fancy vacation. People want fancy stuff and willing to pay a premium irrespective of the value it generates.
20. Quick Money Making Plans:
People blindly invest their money in penny stocks, day trading, gambling, lottery tickets and even in chit funds. They eventually lose all their hard-earned money. I can’t wait for my wealth to grow.
21. Wasting time on unproductive things:
Rather than learning new stuff and growing the skill set, people end up wasting time on social media and YouTube.
22. Lack of disciplined investment:
In the place of spending what is left after investing, people invest what is left after spending. Which causes a big loss of money for them. This indisciplined investment pattern adversely affects their financial life.
Keeping in mind the above points, one can easily avoid these types of financial mistakes and live a successful financial life. Good Luck.
Most of the Indian people have a myth that financial management is a complex subject but In today’s digital world one can easily learn a skill related to financial management with the right use of internet technology. Therefore one should use the internet to learn a new skill instead of wasting one’s time on social media websites.
Lastly, Don’t forget to leave your precious and valuable suggestions and feedback in the comment section, I would love to go through that and It motivates me to publish more FactFile posts. Please mention other points if I missed to include in this article.
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