Everyone in this world makes mistakes at some stage of their life. But the most important thing is they learn from their mistakes. Similarly, while making investments, people commit mistakes and have to loose their hard earned money. What if you know in advance which mistakes you need to avoid? Then your investments will be safe and you won’t loose money. But do we really take care of our financial mistakes? The answer is no. So, today I am going to tell you about some common personal financial mistakes that you should avoid in any case.
Financial Mistakes To Avoid
1. Confusion in insurance and investment
Insurance and investment do not meet the same purpose, so they can not replace each other. The purpose of insurance is to provide financial support to you and your dependents in difficult circumstances, whereas the only purpose of investment is to make money.
2. Do not invest before time
Some of us begin to discontinue the issue of investment. We often pay more attention to expenses and think of saving later. Remember, by starting late investment you will get a lower return and thus you will not get full advantage of compounding. You can get confused if you come near retirement. Before starting investment, you get the freedom to try different investment options, because at that time you can think bigger and take more risks.
3. Purchase with impetus debt
With the ease of getting personal loans and credit cards, people often start borrowing without further worrying. It is your moral and legal responsibility to repay your debt. Therefore, borrow as much as you can with ease from your regular income. According to the rule, all their EMIs should be restricted to 30 to 40 percent of their expenditureable income. You may also be unable to repay debt by borrowing more or borrowing from it.
4. Investing without repaying debt
In addition to repaying your debt and paying dues, a good investment is very challenging. Whenever you have extra money and you have to decide whether to use this money to repay your loan or to get more returns, then invest in it well. Sometimes reducing the balance of home loan such as long term loans saves a lot of money.
5. Do not read important information
Reading a rule or conditions before buying a loan or buying an insurance or investing in any other financial instrument can be a tedious task, but they must be read. Such agreements should not be signed in haste. When you carefully read the terms of the product, you get important and necessary information about it, which can help you make the right decision. Do not just trust the agents or salesmen, or you may have to repent.
6. Do not keep statements and accurate records
It is important to keep bank statements and financial records properly because these documents are often used while filing their returns or resolving a dispute with a financial company. You may also need these documents while applying for a loan. If you read these statements carefully, you will also be able to monitor your account balance, returns, expenses, etc. And it will also ensure that your personal details like your date of birth have been written correctly or not.
7. Enhancing budget
Spending more than your capacity can make your budget deteriorating. Those who spend without saving before, often people are very poorly saved and invested and are not well-prepared to face the financial crisis of hospitalization. Only after taking into account various uncertain events and long-term and short-term needs, you should spend your remaining, spent money wisely, wisely.
While these are some of the common financial mistakes, but still you should try to identify and remove your weaknesses to keep your financial status strong.