11 Worst Money Moves That Can Ruin Your Financial Future

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  • Last Updated on 2 March, 2022

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 Making the right money moves is what you need to do if you want to accomplish financial independence. Unfortunately, while it takes a lot of smart planning to grow your wealth, it only takes a few moves to derail your financial future—potentially for many years to come! 
 
So, to ensure your financial planning remains on the track, here we have listed below some of the worst money moves, which you should completely avoid:

1. Spending First, Saving Later

Mostly, people save only when they are left with money after meeting their expenses. It means, during those months when their expenses are more than their spending, they would have nothing to save. To combat this issue, carefully define the amount you would like to save every month and then create a budget with the remaining amount. Saving is not about living miserably as it’s just about living within your means. 

2. Saving without Investing

For most of the people, savings often involves around putting a lot of money in bank accounts. However, to create a financially secure future, it is necessary for your savings to grow, which is feasible only by making proper investments.

3. Delaying Investing 

We keep delaying our investment plans in the hope that one day we will accumulate enough money to start our investment. However, this is a fallacy. Thanks to the power of compounding, an investment of an amount as small as Rs 500 can produce a big corpus for you in the future.    Consider this, if at the age of 30, you start investing Rs 5,000/month, you will have nearly Rs 21 lakhs at the age of 45, assuming 10% interest rate. However, if you start investing from the age of 25, you will accumulate nearly Rs 38 lakh by the age of 45, at the same interest rate. The time gap of five years can prove costly to you, as seen in the below image! So, start investing now and let the power of compounding show its magic. 

4. Ignoring Term Insurance

As term insurance doesn’t come with maturity benefits, most people ignore buying term insurance when they come to know that there is no maturity amount. However, your family would have to go through tough times in meeting various expenses, including household, medical and loan EMIs, in case of your sudden demise. Therefore, it is essential to purchase term insurance. Further, some insurers also make a payout if the policyholder is diagnosed with a critical illness. Before buying term insurance online, you can use the term insurance calculator online to compute the correct sum assured and premium accordingly. Just enter a few details about yourself, and a term insurance calculator would compute the apt coverage for you.

5. Relying Only on Corporate Health Insurance

Most of the salaried professionals solely depend on corporate health insurance policies and ignore purchasing individual policies. However, the corporate health insurance plan will cease to exist once you leave the job. Also, the employer health insurance policy works on the whims of your company who can trim the coverage to save premium costs. Therefore, it is essential to have an individual health insurance policy which would stay with you, irrespective of your job status.
 

6. Not Reviewing Investments Periodically

It is imperative to review the investment portfolio to ensure it is in sync with the current (or new) circumstances. Also, the periodic review of investments is necessary to secure the investments from market fluctuations by taking immediate steps. 

7. Blindly Following Herd Mentality

Single, married, divorcee, under 50, over 60, male, female, what difference does it make? A good and sound financial advice will always be good for everyone, isn’t it? Financial advice doesn’t follow ‘one-size-fits-all’ proposition. Singles have different risks than the married couples. So instead of blindly following the generic advice, analyse your current requirements and devise a financial plan in accordance with your life goals.  

8. Taking Debt Without Evaluating Repayment Capacity

As it is said, one should limit his/her expenses as per the income; you should also stay away from owing more than what you can pay. If you default on any of your loan EMI or credit card bills, your credit score will be affected, irrespective of how small the loan amount is
 
Be extra vigilant while taking any loan. If you have an existing loan, repay it first before taking any new loan. Get rid of those loans which come with high interest rates. 

9. Ignoring Inflation

Assuming inflation at 7%, you would have to spend nearly Rs 38,000 for an item after 30 years which may cost you Rs 5,000 today. It means you will able to purchase less with the same amount of money. Therefore, it is essential to plan your investment portfolio in such manner that it generates returns which are high enough to beat the inflation impact. 

10. Focusing on tax-planning only

In a bid to save tax, most of the people overlook returns offered by investment options and give importance to tax benefits only. Though this way can help them in saving tax, they would have to incur losses in the long run when their investments would not generate high returns. So instead of focusing only on tax benefits, look for features like past performance of the investment, returns, etc.; before going ahead.   

11. Delaying Retirement Planning 

Most of the people associate retirement planning with people above 40. However, what we forget is that power of compounding works in retirement planning also. You can start early with a small amount and accumulate more money than the person who delays his/her investments.

As the journey of a thousand miles begins with a single step, so take the cue from the above list and start your journey towards a secure and comfortable financial future.

Disclaimer: The content/information published on the website is only for general information of the user and shall not be construed as legal advice. While the Taxmann has exercised reasonable efforts to ensure the veracity of information/content published, Taxmann shall be under no liability in any manner whatsoever for incorrect information, if any.

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