To be honest, we all make errors. What matters most, though, is how we learn from them. That being said, there are a few typical blunders that may have a long-term influence on your financial health and even obstruct your path to financial independence & Financial Mistakes.
In other words, you simply cannot afford to make these blunders! Prior understanding of these blunders might be quite beneficial in preventing them. To safeguard your cash from the consequences of such errors, I’ve compiled a list of a few of them.
Here are 5 Financial Mistakes that Will Cost You Big;
1. Disseminating crucial financial information to others
Do you know that under banking regulations, even couples are not permitted to use each other’s debit or credit cards to withdraw money from ATMs or shops? According to media accounts, a bank refused to return money to a female client a few years ago, claiming that an ATM card is non-transferable Financial Mistakes. The woman’s husband used her debit card at an ATM, but the transaction failed to owe to a technical error.
The idea is that you should not reveal your online banking information, passwords, ATM pins, debit/credit card information, and so on to anybody. You must also maintain these instruments and access information in a secure location. Similarly, you should keep data relating to your investments, e-wallet, UPI, and so on secure and hidden from everyone. Any lapse in this area might result in abuse and serious losses Financial Mistakes.
2. Ignoring inflation while investing
When you invest in your financial goals, one of the main aims is to create wealth. A negative real return rate occurs when the inflation rate exceeds the return on investment. If the current bank fixed deposit rate is 5.20% per year and the inflation rate is 5.50%. That signifies that your wealth is deteriorating at a 0.30% pace since inflation is larger than the return on investment. It is now usual for investors to overlook inflation and concentrate only on the nominal return on investment of Financial Mistakes. Nevertheless, if you want to build wealth over time, you must concentrate on getting a greater actual return on investment.
3. Avoiding insurance purchases
Many individuals disregard insurance purchases as unneeded costs. Nonetheless, appropriate insurance protection is an imperative need to protect your (and your dependents’) money from the effect of unplanned calamities. For example, if you or any of your family members need hospitalization, the medical expenditures might potentially devastate your family’s finances if you do not have health insurance.
Similarly, if a family’s breadwinner is involved in an accident or unexpectedly dies, the dependents’ financial future may be jeopardized if the breadwinner does not have appropriate life insurance coverage. As a result, you should not put off acquiring a thorough medical insurance plan (preferably worth at least Rs 5 lakh) and a sufficient life insurance policy if you haven’t already done so, not only to protect your dependents’ money but also to secure your financial ambitions in Financial Mistakes.
These insurance purchases will also help you save money on taxes. Thus, don’t put off purchasing required insurance since it may be the finest thing you could do with your money.
4. Failure to settle credit card debts on time
Credit cards may be useful instruments for increasing your savings by maximizing the value of your card spending if used wisely and carefully. Unfortunately, many people continue to make the error of irresponsibly using their credit cards and failing to return their debts on time Financial Mistakes. Credit card customers typically get an interest-free period of up to 55 days after which interest charges are charged. As a result, these fees may quickly add up and become unsustainable, harming your credit score along the way.
As a result, you must always stick to your budget while using your credit card and make sure to pay off the balance in full during the interest-free period throughout each payment cycle. To prevent missing payment deadlines, set up a standing instruction with your bank to auto-debit your card dues.
Moreover, paying just the minimum amount due will keep your card account active, but you will still have to pay unnecessary interest charges on the balance dues, and you may not be eligible for interest-free periods until you settle the dues in full. On the contrary, paying your credit card bills on time will not only save you money on interest and penalties but will also help you improve your credit score of Financial Mistakes.
5. Lack of a sufficient contingency fund
A contingency fund is a corpus that may be utilized to fulfill critical expenditures during a financial disaster, such as the Covid-19 epidemic. Many individuals lost their employment or suffered a big drop in company revenue as a result of last year’s pandemic-caused lockdowns. Those with contingency funds, on the other hand, had it easier than those with insufficient emergency funds or Financial Mistakes.
Building a corpus that can finance your day-to-day costs and debt commitments for at least six months in the absence of a regular income is something you simply cannot ignore. You may do this by allocating necessary funds at the start of each month and, if necessary, cutting back on discretionary spending Financial Mistakes. Also, if you depleted your emergency fund last year and your income has returned to normal, you must refill the fund as soon as possible.