It’s a beautiful life & I am sure you do not want to do these financial blunders!!!

Trust takes a long time to build, but only a moment to get spoiled. Similarly it takes a good amount of time to make one’s wealth but only a small blunder to destroy.

You have taken your time and sound financial decisions which lead to a beautiful life for yourself and your dear ones or you are in a process of creating wealth and having beautiful life. Now do you want to destroy everything? No, right, at least not knowingly. This means unknowingly there is a possibility. Hence if you are aware of those unknowingly things you will retain your financial success. Below are some actions which you may do unknowingly and can lead to financial disaster.

  • Not discussing about financial documents

    • Throughout your life you have accumulated your wealth and to secure your dependencies you have taken a few insurances. This means you have plenty of important documents either in soft copies or in physical copies. If you are the only person who knows about these important documents, then there is a problem. In case of any emergency where you are not in a position to get or handle these documents then it will create an issue for your dependencies and might be including you. Below are few suggestions for our side:
    • Create different physical folders and keep all your financial related documents in safe place. Inform your family member about these folder and the place where you kept those. Below is an example to make different folders:
      1. Insurance (Life, Health, Auto, Home etc), including premium receipts.
      2. Mutual fund, Demat, FD, PPF, PF (UAN Card), etc
      3. Bank A/C related, PAN, AADHAR, PASSPORT etc.
      4. Any business related or job related.
      5. “Important Note” folder. Here you can put some important notes for your dependents. All contact numbers of your financial instruments. Financial strategy with your investment for your dependents.
      6. School, College related documents, etc.
      7. “Ready to use” folder. Here you can keep photo copy of documents which you need for most of the things, such as identity proof, address proof, DOB. Also a pen, few blank paper and passport size photos. This will come as handy when you need those documents.
    • Create an excel file and put all the details which are mentioned in the above. Share this file with your dependent and one outsider. This outsider can be your friend, but remember that the person should be the most trusted person as you are sharing your very crucial personal information. You can take a call what all information you can share to your chosen outsider. This will make sure that at the difficult time, if your dependent can not act on important things, this person will help your dependents. Inform him/her why you are sharing this file and what your expectation is.
    • Create a scan version of all the documents which are mentioned above. Share these with your dependent.

 

  • Overspending

    • You went for your grocery shopping in a super market and you started putting the stuffs you want into the shopping basket. While shopping you noticed new flavors of sauces, you saw a new ready to eat item and then you picked these items thinking that you will use these when you will try a new recipe. Then you picked few items which you forgot whether these are in stock or not and finally you are done your grocery shopping.            There is a chance that the new sauce which you bought will be used only once and soon their expiry date will be over. Also you bought items which you already have those at home. All these are over spending and all are due to absence of grocery shopping list.
      • You went to buy a car and your budget is let’s say at max 5 Lac, but the way sales person showed you that if you just spend 1 Lac more you will be getting a very good deal and you bought a 6 Lac car. This is over spending.
      • When you shop from Amazon, you can see if the total cart value is less than 499 there is a delivery charge & it shows if you can shop for X amount to make the cart value equal to or greater than 499, the delivery will be FREE. There is a chance that you will end up buying things which are not planned to get that FREE delivery. This is overspending.
      • In Big Bazaar you see offers such as if you shop for 2000 rupees you will get 1 KG of sugar FREE. You can see that to get 1 KG FREE sugar most of the people make their bill above 2000. This is overspending.
      • We shop more when we see BUY one get one FREE, BUY three get four FREE. Interesting advertise: Book your flat and get a car FREE. Buy a car and get a gold coin FREE. Book now 3 days & 2 nights Singapore holiday to get 1 extra day FREE.

      When you overspend then it is certain that you have to compromise on your future important things. So think about this.

 

  • Taking too much Debt

    • To fulfil our dream or in case of emergency there is a chance that in our life we have taken few loans. Things are fine if the loan repayment amount is within our limit. If for any purchase you always think about a loan (credit card, personal), then you should understand that you might be taking too much debt and this can lead to debt trap. Make sure that you take a loan if and only if there is no other way and the thing for which you are going to take a loan is really a necessary.

      CIBIL (Credit Information Bureau (India) Limited) collects and maintain monthly reports (Credit Information Report – CIR) from banks and financial institutions, detailing individual’s loan and credit card payment history. A Credit Score is a three digit numeric summary of your credit history.  The value ranges between 300-900. It is  derived  by  using  details  found  in  the  Accounts  and  Enquiries  section  in  your   Credit   Information   Report   (CIR).   It   indicates   the   ‘probability  of  default’  of  a  borrower  based  on  their  credit  history. The CIBIL Score plays a critical role in the loan application process. After an applicant fills out the application form and hands it over to the lender, the lender first checks the credit score and credit report of the applicant. If the credit score is low, the lender may not even consider the application further and reject it at that point. If the credit score is high, the lender will look into the application and consider other details to determine if the applicant is credit-worthy.

      Hence if you take too much of debt and you miss any of the payment to the lender then it will directly affect your Credit Score.

 

  • Guarantor / Co-payment / Co-Sign / Assurity

    • It can happen that to help someone you may sign guarantor/co-payment/co-sign/give an assurity. Now if in case that person misses any payment or completely defaults then you will be in trouble. This will directly affect your credit score and also it can hamper the personal relation. Hence try not to do so or if there is no other way to help that person, time to time verify that payments are not missed by your joint holders or the guaranteed individuals.

 

  • Miss important bills

    • There are few important bills such as all kind of insurance bill, electricity bill, and mobile bill, if you miss then it can create a big issue for you and your dependency. Hence don’t forget and if possible make it auto payment mode.

 

  • Seeking to get rich quick

    • Investing should be more like watching paint getting dry or watching grass grow. If you want excitement take $800 and go to Las Vegas. – Paul Samuelson

      We heard many a times that Mr. X put money in stock market and within no time, his money got tripled. Or Mr. X put money in chit-fund and within 1 year his money got doubled. Or Mr. X invested in real estate and his investment got doubled within no time. In 24×7 business news channels, on the financial sites or even the financial mobile applications; we can get hot tips for quick gains. Our friends, relatives, relationship managers of the bank, insurance brokers; everyone seems to know everything and frequently gives us sure shot tips for quick money.

      Have you ever tried to find out who was that Mr. X? Did you talk to him? Those financial pundits who give hot tips, did you verify whether they put their own money on those tips? Is there any data available for you to verify those hot tips? I think most of the time, these questions did not come to your mind, or you believe these tips work. Even few follow these tips and lose their hard earned money and decide not to invest in anything and finally keep money in FD or RD.

      Achieving rich financial life is possible and it takes time. If you really want to be financially rich then you have to invest in your knowledge and be a disciplined investor.

 

  • Borrow money to invest

    • When you borrow money to invest? It’s when you think the investment instrument will give you more returns then the borrow money’s interest rate. To do so you might choose the investments which are risky in nature and if you do not understand properly about this risky investment, there is a chance that you will actually lose your money. This can lead to a low credit score or problem in personal relationships
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