Let me tell you the story of Sunny.
He is a bright young man.Only 32 now.
He has got a job that pays him well. He got married to his girlfriend just 1 year back. They live with his parents in an apartment that he has bought on loan.
Life has given him enough to be happy. Sunny is happy, but…
Sometimes, he feels that he is running short of cash. As if, he is unable to control his spending.
If only, my salary was a bit more… – Sunny
Do you feel like him?
It’s very common. It happens to all of us.
At some point in life, we all find it difficult to manage our expenses with our income.
but you must learn to handle it.
You must be aware that the problem is not with how much you earn. It is how you handle your money.
Most probably, you are making some mistakes. And these mistakes are preventing you from enjoying better freedom with your money.
In our previous article, I warned you about the 5 most common money problems people make in India. Today, I shall show you 5 more Money Mistakes That Are Keeping You Poor.
Come on, let’s start-
Mistake#6 Misusing Your Savings Accounts
You should not keep very big amount in your savings accounts.
Because, you lose your money to inflation if you keep it stored in a savings account.
Let me show you an example,
Imagine that you want to buy a motorbike next year. Its price is ₹100000/-. You save the money this in a savings account.
The average long term inflation is 6-7 % in India. So, next year the price of the bike will be
= ₹100000 x 1.06 = ₹106000/- (taking inflation @ 6%)
And you get about 4% interest in savings account.So, after 1 year the value of your savings will be
= ₹100000 x 1.04 = ₹104000/-
That means, your money will lose ₹2000/- in value due to inflation. You will pay it from your pocket. If you put your money in some account that gives more than 6% interest, then this will not happen.
Some people don’t understand this. They often keep lakhs of rupees in their savings account.
The main purpose of savings account is to provide you cash immediately. You should keep only your emergency fund in your savings account.
Mistake#7 Misusing Your PF Money
Another very common bad habit of salaried people is misusing their PF amount.
They withdraw PF money to repair their house, to pay for child’s education, even for vacation!
STOP IT NOW!
Provident Funds are created to provide financial support to you during retirement. If you treat it as another savings account, then you are waiting for BIG trouble during your retirement years.
Mistake#8 Not Making A Family Budget
Answer my question in 2 seconds-
- What is your family’s monthly budget?
Most people in India won’t be able to answer it. To them, budget means, what the honourable finance minister reads for 4-5 hours in the Parliament in February every year.
But they don’t understand that every family also has a budget. It’s the average income and expenses of that family every month.
You must prepare a monthly budget of your family. It will help you cut down unnecessary expenses and increase your savings.
Mistake#9 Buying Gold Ornaments As Investment
How do you purchase gold? Or as coin, bars, gold bonds etc.
You can buy gold ornaments for your wife, mother or daughter. Then it is considered as an emotional asset. And besides, it helps in keeping the house under control! 😉 (pun intended)
If you buy gold ornaments to invest your money. Then you are doing it wrong. Gold ornaments are hard to sell and will fetch you much lower value than gold coins or bonds.
Get rid of your addiction of physical gold and invest in Sovereign Gold Bonds issued by the Government.
Mistake#10 Not Investing In SIPs
The common conception about the share market is that it is a place for cheats and frauds.
Why? Because, you’ll only hear news of losses that people make at the stock market. But, the truth is, stock markets now are a highly regulated place by the Government (SEBI).
And it takes very high patience and skill to succeed at share market investing. If you want to make big money in the stock market, you must be ready to wait patiently for 15-20 years or even more.
The best way to invest there for small investors like you is through SIPs. You should select a purpose that is more than 5-7 years away, like- retirement, child’s higher education etc. and start an SIP.
In this two part series, I covered the 10 most common money mistakes that people make. If you haven’t read it, you can find the 5 most common financial mistakes here.To successfully manage your financial life, you must learn to avoid the mistakes that other people make.
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