Five Financial Mistakes of a Common Man
18 June, 2021
To really be honest, we all make errors. What matters most, though, is how we benefit from them. However, a few typical blunders can have a lengthy influence on your fiscal viability and even become a roadblock on your path to prosperity and independence.
To put it another way, these are errors you just cannot expect to pay! Prior understanding of these blunders might be quite beneficial in preventing them. I've compiled a list of a handful of these blunders in order to safeguard your funds from the consequences.
1. Disseminating sensitive financial information
Did 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? Per the news sources, a bank offered to pay money to a lady client a few years ago, claiming that an ATM card is non-transferable. The woman's husband attempted to use her atm card at an ATM, but the transaction failed to owe to a technical error.
The point is that you should never reveal your online banking information, passwords, ATM pins, debit/credit card information, or any personal information with anybody. You should also maintain these instruments and access information in a secure location. Therefore, you should keep information about your savings, e-wallet, UPI, and other financial transactions private and secure. Any sloppiness here might result in misappropriation and huge losses.
2. Investing without taking inflation into account
Whenever you invest in your financial goals, one of the main aims is to create wealth via trading in forex, crypto, stocks and other forms. A negative growth return rate occurs when the rate of inflation is greater than the rate of return on your investment. Assume that the current bank fixed deposit rate is 5.20 per cent per year and that inflation is 5.50 per cent. It signifies that your wealth is deteriorating at a pace of 0.30 per cent per year since expenses are higher than your return on investment. Investors are increasingly ignoring inflation and focusing only on the monetary return on investment. However, if you want to build wealth over time, you should concentrate on achieving a greater actual return on the investment.
3. A lack of a sufficient contingency fund
A backup fund is a fund that may be used to cover vital costs in the event of a financial calamity, such as the Covid-19 outbreak. Thousands of individuals lost their employment or suffered a big drop in company income as a result of last year's pandemic-induced lockdowns. Those with a reserve fund in place, on the other hand, had it easier than those with an insufficient emergency reserve.
4. Failure to pay credit card bills on time
Credit cards may help you save money by maximising the value of your card purchases, as long as you use them wisely and properly. Many people, however, continue to make the error of irresponsibly using their credit cards and failing to pay their bills on time. Holders of credit cards often get an interest-free term of up to 55 days, after which they must pay interest. As a result, these payments can quickly pile up and become unsustainable, harming your credit rating in the process.
5. Skipping the purchase of coverage
Many consumers consider insurance expenditures to be superfluous expenditure and hence deprioritise them. Nevertheless, appropriate insurance coverage is a must to protect your assets (and those of your family) from the effects of unplanned calamities. For instance, when you or a family member has to be hospitalised, the medical expenditures might potentially devastate your personal wealth if you don't have healthcare coverage.
« Go Back to Articles