What if, you could buy anything you like?
Travel to anyplace in the world?
It would be great. Na?
Yes, we all love to have a life like that. But, that is a life for the rich.
Yes, the rich people can enjoy life as much as they want.
But, if I tell you that you can do it too?
I know, you can’t believe me.
But, trust me, being a wealthy man (or woman) is possible if you are ready to try it. I am not suggesting any lottery,rummy or poker,reality show, game or anything.
I’m not talking about luck. I’m talking about you actively working to get wealthy everyday.
You can have a rich life if you are ready to follow some rules throughout your life. Everywhere on Marbias Money, you’ll find me telling you about these rules.
Today, I’ll show you the first part of a 2 part series- the 5 biggest financial mistakes that prevents you from being rich .
Do you feel like, money slips away from you?
It is because you spend it by mistake. There are some very common mistakes that people make which prevents them from saving enough money.
Let me show you-
BIGGEST FINANCIAL MISTAKE : TIME WASTING
Ask me to name one single money mistake that people make,
I’ll mention time wasting.
Time is the most important factor towards your financial well being. The more time you have in your hand, the better your situation is.
But most people don’t under.stand it.
Let me show you an example,
Imagine you are in your office now. It’s lunch time and you’re having your lunch with your boss. (Don’t smirk buddy! A good boss does have lunch with his subordinates. 😉 )
He is seating across the table. And, you are discussing about a happy retired life.
- Both of you want to save ₹ 1 crore before retirement.
- Your boss is 45 years now and he is 10 years older than you. So your age is 35 years.
- Your boss has 15 years before retirement. And, you have 25 years.
- Both of you want to invest only is Bank FDs. Current rate of return of Bank FDs are about 6.5% per year.
Now, let us first see your case.
How much do you need to invest every month to save 1 crore in 25 years?
₹13355/- per month.
And, how much your boss needs to save every month?
₹32944/- per month.
Your boss must invest more than twice your amount.
Because, he has 10 years less to reach his goal.
So, don’t waste time.
Start saving for your own goals right now! Start with how much you can. Then gradually increase it as your income grows.
Time wasting is the biggest financial mistake that you must avoid. So many people make this mistake that I have moved it above the other mistakes that I shall discuss next.
Since this is a big list, I have divided it into two separate articles. This is the Part I. You can read the Part II here.
Lets carry on.
Mistake#1 Taking Too Much Loan
Loans are one of the biggest financial mistakes in India.
You can get addicted to loans because it’s easiest way to get money. You can buy cars, bikes and even mobile phones by taking loans now.
But, it’s a BAD,BAD thing to do.
Except only, may be home loans. Because, you buy a home to live there. A home is a necessity.
Even then, if you take too large loan just to buy the best flat among your friends, then it is not good. You are doing it for luxury.
And luxury on borrowed money does not look good.
Once you get the habit of taking loans for small things, you will not be able to get rid of it. You’ll slowly start to take loan from banks,credit cards, cooperatives,friends and relatives.
And the bigger part of your salary will go towards paying EMIs. Soon you’ll have the EMI as your biggest monthly expense.
Just think, which is better-
Working the whole month to put the money in someone else’s pocket?
If you deposit ₹8000/- every month in a recurring deposit for 10 years, you’ll get approx. ₹1468934/- at the end. You can buy your car with half of it and keep the rest for meeting the cost of maintenance.
Mistake#2 Delay In Building An Emergency Fund
Do you have ₹100000/- in savings account?
Why am I asking this? Let me explain,
Consider an imaginary situation, where you have kept all your money in Bank FDs and you don’t have sufficient money in savings.
God forbid, someone in your family gets seriously ill. And you need money on emergency basis.
What would you do? Take your family to the hospital? Or run to your bank to break your FDs?
What if it is a weekend?
I took ₹100000/- as an arbitrary value. Ideally, your emergency fund should be your 6 months expenses, i.e-
Emergency Fund = Your Monthly Expenses x 6
Don’t be lazy, create your emergency fund now. You’ll thank yourself one-day.
Mistake#3 Not Understanding The Benefit Of Passive Income
Your salary is your primary income.
You earn it by working the whole month. It is also called your active income.
Any other income, that you get without actively working for it, is called passive income.
Multiple sources of extra income can help you to get wealthy very fast.If you can create a new source of passive income to support all your different expenses, then you can be called really wealthy.
Say, for example,
- Interest from MIS, FDs supports your home loan EMI.
- Rent from house property supports your monthly family expenses.
- Stock/Mutual funds dividend etc. supports your car maintenance etc.
Always try to think of ideas for generating extra income. I have written an article about 50+ extra income ideas for you to read. You can try any one of them. Or you can create your own idea.
Mistake#4 Neglecting Your Health And Not Insuring It
Another big cause of sudden financial problems in India is medical expenses.
Even a wealthy family can sink into poverty if they suffer high cost of medical treatment.
By conservative estimates, cost of medical treatment doubles in approximately 5-6 years. You should be prepared to pay dearly if you neglect to take your health insurance.
Be careful if-
- You have a small policy (< 5 lakhs).
- Or, if you are covered by your employer,
Treat this cover as your base cover. And then take a Super Top Up Health Insurance cover of at least 10-12 lakhs for your whole family.
Mistake#5 Buying Unnecessary Life Insurance Policies
It happens whenever, you get a promotion or pay hike.
Your insurance agent somehow gets the news. He then starts advising you to buy another insurance scheme. He shows you big projections of how much money you’ll get if you start now.
Most of the time you fall in the trap and take another insurance policy. Do you know how many life insurance policies should you have?
Preferably one. Maximum two – three.
And do you know how much life insurance you need?
Roughly, about 30 times your yearly expenditures.
You need to get such a big cover from only 1-3 policies. There are different types of life insurance policies. You must select the ones that’ll cover you and the premium is within your budget.
Your agent will never tell you this because the more policies you buy, the more commission he will get.
It is not very difficult to get rich.
You may get lucky and win 1 crore prize in a reality show. You’ll then have enough money to be called really rich.
But, it is more difficult to stay rich.You must be able to plug the holes where your money flows out.
Today, you learnt about the 5 biggest financial mistakes that prevents you from getting rich. In Part II of this series you will learn about some more of these mistakes.
So stay tuned! And, if you liked this article, please help us by sharing it.