I have
learned over the years about various mistakes that can be made by us some of
them have been made by me & some I understood from others. See if you are a
victim for these & weather the solutions given help you.
1. Not
knowing how much you spend.
Do you know how much you spend in the month at least on
a gross basis?
Well this is one of the most common mistakes, you must
know the expenses that you are making, and also note Investments are not
expenses this should be noted…., This mistake happens because it is very
difficult to keep a track of expenses
Solution : I know from my experience that It is very difficult to
keep track of expenses & is very tedious so I found a simple way of doing
it, I maintain 2 linked bank accounts, 1st account is only for incomes (Salary, Dividends, Interest Etc.) & Investments,
2nd
account is only for monthly cash expenses, EMIs, credit
card bills & other small purchases etc., where I keep allocating an
amount as & when required every month this way I know exactly how much I am
spending on total basis. The only
discipline which needs to be maintained is to never make an expense transaction
from the 1st Account.
2. Not reviewing your investments, policies
periodically
A lot of people have a tendency to start working and
then never look at, or review their finances. When they finally look back at
their finances, they find that they have money lying in 10 places & they
will have to spend few days just to get the documents in one place.
I have friends who have 5-6 LIC policies, 2-3 Demat
accounts (from the first year free offers), FDs in 4-5 Bank branches, all
scattered in various envelopes,
Solution : Start with investment listing (portfolio) in a simple
excel sheet along with the policy numbers etc
, this will at least give you an idea about where all your investments
are which helps you in review & decision making.
3. Not starting the investment.
Yes we keep differing that tax investment, that health
insurance policy, that mutual fund
investment to tomorrow in the mean while our money keeps rotting in bank
accounts or gets spent…… so do it now, because you are already late, The main
thing about investment is not letting the money lie idle & getting returns
from the same without much efforts.
Solution : Start today by at least making the FD of money in your
savings bank account (9.25% pre tax or 6.5% post Tax ) or invest the money in good Ultra liquid
mutual funds (8 % Post tax) so the money keeps growing. You will be surprised
to know that Duration of
investment is more important than the rate of Return due to principle of
compounding.
4. Buying
products from Relatives or Bank Relationship Manager.
Most times, the “Best plan” comes from one of your
relatives or Bank RM. STOP IT PLEASE! A
simple NO might hurt your relations with said person, but it will save you,
your hard-earned money & regret for your whole life, its just common sense
that there are better advisors and consultants than your relatives or a close
ones, unless the relatives themselves are known and respected in the field of
finance.
Most of the people I meet have shared their bitter
personal experiences, where they bought products because it came from their
relatives, Uncle’s & many cases from the Bank RMs.etc. The Bank RM is
especially dangerous because he knows exactly how much money you have lying
idle.
Solution: Say No thank You. Better still to avoid the Bank RM harassing you keep
minimum Balance in Savings bank Account, (Ideally not more than 2 months of
your routine monthly Expenses)
5. No
Financial knowledge to Spouse/ Parents (if single)
Does your wife know about any of the following?
Your life insurance policies, Your FDs, Your Bank
accounts, Your loans etc., Your portfolio (Mutual funds, Shares etc.) ,Company
Health Insurance details.
Most people don’t feel the need to tell their spouse
about any of the above, this is a big mistake. Imagine a situation where you
are injured in accident & need to be hospitalized, what will happen if wife
does not about anything about the bank, the money or the health Insurance, I am
quite sure there will be utter chaos.
This is precisely why sharing this knowledge “AT LEAST
ABOUT THE BASIC OPERATING ASPECTS” is extremely important,
Solution: Create a simple excel
document & keep the printout in your money drawer, (Keep updating the info once in a month) & ask
your spouse to read it at least once………
6. Not
taking Life or Health Insurance or Personal accident insurance
Probability of dying or accident is almost the same for
everyone, but everyone feels that they have better chances, of not being part
of an accident or an attack.
Be realistic; especially in bigger cities the chances
of accident is higher than smaller cities. More casualties happen in bigger
cities. Take adequate Life and Health cover & PLEASE GO FOR PURE TERM
INSURANCE COVER OF CORRECT VALUE & NOT ULIP OR INVESTMENT INSURANCE.
Solution : Go on internet do research now a days many good companies have come out ONLINE
TERM INSURANCE policies which are extremely cheap pl. go for it, (e.g.
Rs.6500/- annual premium for 60 Lacks of Cover)
One of the best websites which I have come across for
health insurance is MEDIMANAGE.COM which provides excellent data through their
agents who call us up & policy can be bought online.
Please do not
buy any product the moment the salesman talks about capital protection or
Highest NAV guaranteed because you will regret this investment, just stop &
say good bye, I will be sending a separate
article on this sometime on how the products are not very good for individuals.
8.
Combining Insurance & Investment.
NEVER MIX INSURANCE & INVESTMENT. THEY DO NOT GO
WELL TOGATHER
Insurance is
planning for your Death -- Investment is planning for your
Life & it is impossible that you can do both in one product. So when
you buy insurance it must be pure term plan where money does not come back to
you. The problem is mainly the hefty commissions involved in this business
which make people do some wrong things….
Solution: ANY INVESTMENT LINKED INSURANCE IS A STRICT
No.
Other Links:
How Highest NAV Guarantee Plans Work
Other Links:
How Highest NAV Guarantee Plans Work
No comments:
Post a Comment