To build your wealth consistently you will need an effective financial plan. It includes specifying goals, saving regularly, involving in investments with that savings and protecting the assets. But there are many who fall into making financial mistakes.
Here are the common mistakes you should avoid doing with your money.
The mistake of ignoring inflation
Many people ignore the time value of money or the money losing its value over time while planning finances. When you consider the increase in income, it is important to make note of the expenses and the rise of prices annually of common goods and services. You cannot be over dependent on the safe investments like savings accounts, bank fixed deposits and government bonds.
The mistake of underestimating long-term expenses
It is important to consider the right estimation and value of health care and other long-term expenses when considering saving for retirement. The long-term costs increase with time and age and so does health care expenses. It is vital to consider these expenses correctly to have an effective retirement plan. Otherwise, you will compromise with your finances during the years where your income would be zero.
The mistake of not saving enough or investing
Saving should be an essential part of your young age of earning. Investing when you are young is possible with consistent savings. Consider the money you pay for the taxes, figure out an effective plan to maximize your savings and not just depend on the control of daily expenditures.
The mistake of investing very excessively or very soberly
There is a common conception of investing excessively during the age of 20 to 40 years, which is true. However, one shouldn’t be blind to the risks and use logical investment strategies. Exposing your money to more investment risks can bring you close to more loss than you had planned for and will make you give up the idea of investing altogether.
At the same time, investing soberly has its disadvantages too. It may lead to a loss in the value of money. If you keep stocking money in your savings account eventually it will lose all its value.
Invest considering the degree of risks to make your money grow consistently.
The mistake of considering financial plan all about investment
Investing is one part of an effective financial plan which should be made to meet your long term goals. Budget daily, focus on appropriate insurance policies and take smart tax decisions.
The mistake of viewing insurances as all about saving tax
In India, this can be a well-known mistake. Any kind of insurance is an expense and not an investment. Buying insurance of any kind just to save tax is the worst mistakes you can do with your money unless you really need the insurance. Life insurance should be bought only if you have dependents but health insurance is a must in the present healthcare scenario. The utility of any insurance should be given more importance than the tax benefits.
