With scores of people newly taking up personal finance practices, mistakes are bound to be made. In the race to become a crorepati, or to reach the coveted billionaire status, the craze to create wealth may leave you blindsided to some crucial personal finance management errors. While mistakes are all part of the learning process, your financial planning blunders could greatly affect you in the long term.
You could approach a money manager or take financial advice from friends and family. However, you could put the “personal” in personal finance by being forthcoming in your approach and learning the dos and don’ts of financial planning. Most people may ignore the latter as they hurriedly begin building a roadmap towards wealth creation, but your financial oversights come at a price.
Consequences of Zero Financial Planning
If you have been overlooking financial planning, then desist! Look at the outcome of not taking an interest in organising your finances.
- The longer you put off personal finance management, the higher is the risk of you missing out on your financial goals.
- The lack of savings will delay your retirement date
- Sudden expenses could threaten the delicate balance of your savings, forcing you to seek loans or overburden your credit card/s
- With no control over your income and expense management, you will be burdened with stress
- Wealth creation will become a farfetched dream as you struggle to make ends meet
Financial planning ensures security and stability, along with steady wealth creation. However, to make your short, medium and long term plans a success, you need to watch out for potential financial missteps.
Common Financial Planning Mistakes
Sometimes all the financial advice in the world is not enough to prevent you from committing these blunders. Watch out for these misgivings, especially since they tend to mask themselves as a necessary element in your daily expenses.
Endless Piles of Payments
While recording the number of expenses for your personal finance plan, you may have added in some unnecessary payments. This could be a fancy gym membership, which you rarely use, or subscriptions for lifestyle, music, or movies.
Re-consider the cost of these expenses, question whether they make any real contribution to your life. Spend your money wisely!
Not Repaying Debts in Proper Order
More often than not, people tend to ignore this financial advice. By not following your debt repayment in proper order – highest rated debt to the lowest – you’re at the risk of neglecting high priority debts.
A Prey of Procrastination?
If you want to create a financial plan, then consistency is key. A disinterested approach towards personal finance management will garner equally poor results. Take a proactive stance! If financial planning has caught your interest, begin today, and not tomorrow.
Track your spending and saving habits regularly; this will give you accurate data while assessing your financial activity.
It’s Not All About Investing & Tax Benefits
The whole idea is to save to create more wealth, not just invest for tax exemptions. Your primary focus should be on everyday expenses and budgeting while purchasing an adequate insurance cover for your life, family, and belongings.
Only purchase life insurance if you have dependents; understand the utility and logic behind the insurance plan you choose.
Retirement Plan: Investing Too Much or Too Little?
Experts advise that you save a part of your savings to create a retirement fund. However, some people might overestimate how much they need during retirement. Incidentally, they end up forgetting about their short-term goals, saving up in excess for long term goals instead.
Is family planning in the books, or perhaps, a shiny new car? Then hold off on saving excessively for your retirement!
If you have been making any of these mistakes, then don’t worry! Detecting them early on is the best way to avoid any harsh consequences.