Life-Changing Investing Mistakes
Introduction
Investing is the method of generating profits with the money we save. Money is the most important thing in the life of any individual. Without money, no one can survive. Therefore we must start saving our money and start investing. Financial planning is the first step to take. Financial planning helps us set short-term and long-term goals for ourselves, and based on these goals, we can create a plan and spend our money accordingly. If financial planning is not designed correctly, we can make many mistakes that can greatly affect our lives. Some of the mistakes we make are discussed below.
“The first wealth is health” – Ralph Waldo Emerson
In today’s world, not buying health insurance is the biggest mistake one can make. Due to pollution and unhealthy lifestyle, people are infected with many diseases in the early stages of their lives. Health is one of the most crucial and important factors in an individual’s life and should not be ignored. There is a saying that “health is wealth” and people are so busy earning a living that they are often unaware of their wealth. Therefore, this crucial factor of life must be backed by insurance.
Let’s take an example:
Mr. Stanley Rosario is a hard-working military man who works at a marketing company. One day, on the way to his work, he met with an accident. He received so many injuries that he had to be hospitalized. His hospital fee amounted to 60,000 rupees, which is more than his salary for a month. Now, if he had done proper financial planning and purchased health insurance, he would not have to worry about hospital fees.
Today life-threatening diseases such as cancer are very common. Treatment of these diseases is very expensive. A common man cannot afford to pay for these diseases himself. Health insurance plays a very important role in this case. Health insurance can cover the cost of treating this disease.
Doing financial planning from the day you start earning is very important and the purchase of health insurance should be included in this financial planning.
Your best bet is to have term insurance
There are many families especially in India where there is only one person working and the whole family depends on that person. If that person dies, what would happen to the family’s financial requirements?
“Most people don’t plan to fail, they fail to plan” – John L. Beckley
Therefore, the winning member must purchase a term plan to secure their family’s financial requirement. A term plan is a type of life insurance that provides coverage for a set period of time. If the person dies during that period, the insured sum will be delivered to the other member of his family. The term insurance plan is less expensive than other life insurance. One must include the purchase of a term plan in his financial planning.
Save money and money will save you
The young generation in India has this mentality of spending all the money they earn instead of saving it. They believe in this philosophy that whatever happens, they will see later, let’s enjoy life now. They don’t do financial planning. But this is the biggest mistake they make by not thinking about the future.
Many unforeseen events can occur where a large sum of money will be required, so where will they get the money from? If we don’t start saving today, then we won’t be able to maintain our standard of living. We also need money for emergencies and to avoid taking loans in this situation. In today’s world saving is a duty and if we are not saving we are making a mistake.
Too afraid of diversification?
We live in a world where there are a variety of financial instruments available in which we can invest. People like to invest in Fixed Term Deposits and Public Provident Funds because the operation of these instruments can be easily understood. But there are many other financial instruments available that give us a higher rate of return than fixed deposits, such as stocks, mutual funds, and government securities. We should diversify our portfolio to earn more and also reduce risk.
Taking a step away from freedom
Debt is the amount of money we borrow from other people when we can’t meet our financial obligations. When we borrow debt, we also have to pay interest on it. There are many types of debt, such as bank loans, home loans, car loans, student loans, etc. Businesses take out loans to run their businesses. People borrow to meet their needs. We have seen that many times companies go bankrupt for not being able to pay their debts.
“Borrowing money is the most common way smart guys go broke” – Warren Buffett
On individuals, there is always the burden of paying interest and repaying the loan. There are many borrowers who try to attract people by introducing different types of schemes and people get trapped in these schemes. If we do proper financial planning, we will not be in a position to borrow so much. We will not be in the stress of paying off those debts and will be able to live a financially secure life if financial planning is done early in life.
Control your impulses, when you’re broke
In this modern world, we are attracted to things we don’t need. We buy branded clothes, we are attracted to gadgets, we hang out with friends in expensive cafes, etc. We compete with other people in society to show how well off we are. But instead of spending unnecessarily we should start investing in financial instruments.
“Many people don’t worry about their money until it’s almost gone, and others do the same with their time.” -Johann Wolfgang von Goethe
There are many schemes like low cost EMI, low interest rate credit cards, cheap loans etc. that they get caught up in. We must be cautious where we should spend our money. This should also be included in our financial planning. We should never overspend our money as it will lead us into debt in the future, which creates more stress. We must spend our money wisely. Therefore, financial planning at an early stage is very important.
bottom line
The wrong decisions that are made in our life can drastically affect us. Therefore, it is very important to start financial planning as soon as we start earning. No individual has the same set goals. So financial planning will differ from person to person. As per the financial requirements, one should set his goals. If we do not have knowledge about investment products, we can receive help from financial advisors. They help us do financial planning.
Questions about finances?
If you have any questions, your financial planner is always ready to help.
