These Financial Mistakes Can Cost You Dearly


Life is a game of choices. You have many options before you, and you have to choose the most appropriate one. The decision you make can either be beneficial to you or might prove tricky. The same logic applies to your financial matters. You have to get your planning right. However, it is not always possible to do that.

People tend to make mistakes, but the trick to success in life lies in bouncing back from the mistakes and rectifying it. Some of the errors can be elementary such as sticking to a savings account when you have the higher-income generating recurring deposits or the fixed deposit options before you. Similarly, many people are averse to investing in SIPs and mutual funds that can generate better income than the bank fixed deposits. Of course, we cannot alter your thinking, but we can indeed list out some of the financial mistakes that can cost you dearly. 

Budgeting – Don’t be Kidding, That is Not for Me 

If you think budgeting is not for you, you are making a huge financial mistake. Without a budget, you will never know where your finances are heading. It is similar to driving on an unknown terrain without a map in your hands. You go round in circles and end up nowhere. Similarly, having a budget is vital. Now, the best aspect of it all is that budgeting is an easy exercise. You have to balance out your income and expenditure. It is evident that spending more than what you earn will take you down a slippery slope. So, take a paper and pen in hand and start listing out your expenditure and income. You have mobile apps to do this job for you. Install one on your smartphone. It helps to keep track of your expenses. 

Smaller the Home Loan EMI, the Better it is 

In the immediate future, you are right. A smaller EMI (Equated Monthly Instalments) entails that you pay less. Hence, you have a higher disposable income with you. However, this decision can backfire in the long run. Consider this example. Ram has a Home Loan of Rs. 30 Lakhs repayable in 30 years @ 9%. His EMI works out to Rs. 24,139. He pays a total interest of around Rs. 57 Lakhs over the entire 30-year period. Shyam has a similar loan but with repayment tenure of 20 years. His EMI is Rs. 26,922 with a total interest outlay of about Rs. 35 Lakhs over the 20-year period. Notice that the difference in the monthly instalment is about Rs. 2,800. However, the interest outlay variation is a whopping Rs. 22 Lakhs. You decide who benefits more. We leave it to you. Therefore, opting for a shorter tenure is beneficial in the long run especially if you can pay the difference in the EMIs comfortably. 

All Insurance Policies are the Same 

No, they are not. The policy that suits your friend need not necessarily suit you. There are various insurance products in the market. Go through them and decide on the one that suits your lifestyle the best. Consult an insurance expert before deciding to purchase the policy. Insurance agents love to sell policies that benefit their interests. You can take your time to decide by consulting others.

Many people opine that purchasing insurance is a tax-saving measure. They are right in a way. However, you should not look at insurance entirely as a tax-saving instrument. They can benefit you in many other ways. 

Investing in Real Estate is the Ultimate 

People have a general opinion that land is one asset that does not depreciate. Hence, investing in real estate is the ultimate investment of all. It is right to a certain extent, but real estate investments are not liquid enough. You might not be able to realise the actual value of the investment in an emergency. Secondly, investing too much in real estate can make you victims of the real estate scams and land disputes. You might even lose your entire asset within no time. Therefore, follow the golden rule of investment, “Never put all your eggs in a single basket.” Diversify your investment over a range of different assets.

Credit Cards are There to Freak Out 

Credit Cards are excellent friends as they help you out in financial emergencies. At the same time, they can prove to be the worst enemies because of the high interest rates they charge. It is of course if you default on the payments. Therefore, the key is to use the Credit Cards intelligently. Ensure that you pay the Credit Card bills on time. Your budgeting exercise can come in handy here. You end up improving your credit score in the bargain. A good credit score helps you in securing Personal Loans Online Approvals.

It is very easy to pick up the wrong financial habits. Steer clear of them. It ensures that you lead a comfortable life. You end up with a good credit score thereby making you eligible to get an unsecured Personal Loan at any time.

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