New Delhi. In today’s time, many people work hard, earn well and manage their expenses, yet at the end of the month they feel that money is running out of money. Often the reason for this is not low income, but some small but persistent financial mistakes. These mistakes gradually weaken your financial position. If these are not rectified in time, financial problems may increase in future.
Mistaking insurance for investment
Many people take insurance plans that promise returns along with protection. Endowment or whole life plan are examples of this. The premium in these plans is high and the returns are low, often around 5-6 percent. At the same time, cheap term insurance only provides protection and if the remaining money is invested in instruments like mutual funds, then you can get better returns in the long run. The rule is clear – keep insurance and investments separate.
Paying only minimum credit card dues
Paying the minimum credit card amount seems easy, but this is the most dangerous trap. Suppose there is a bill of Rs 50,000 and you pay only Rs 2,500. 3-4 percent monthly interest is charged on the remaining amount, which can reach 36-48 percent annually. The debt may double in a few years. The best way to avoid this is to pay the bill in full or use the credit card limitedly.
investing without understanding
Often people do a lot of research before buying a mobile or TV, but in case of investment, they invest money immediately on the advice of a friend. If you are not able to understand what the company does, how it earns money and what the risks are, then you should not invest there. Investing without knowledge will only cause loss in the long run. Luck in the market can sometimes lead to profit, but with time the chances of loss are high.
Increase lifestyle as salary increases
When salary increases by 20 percent and expenses increase by 40 percent, you are not becoming rich, you are just spending more. Expensive clothes, big house, new gadgets and frequent traveling – all these are examples of lifestyle inflation. Real wealth is created by the difference that remains between earnings and expenses. It would be better to invest at least 50 percent of the increased amount in savings or investment when the salary increases.
put all the money in one place
Investing all your money in a single sector or a single asset is a big risk. If there is a decline in that sector, your entire capital may be at risk. Therefore, it is important to divide investments among shares, debt, gold, real estate and different sectors like banking, IT, healthcare and FMCG. Diversification acts like a safety belt, which protects your savings even in shocks.
small mistakes, big impact
These five mistakes seem small, but in the long run they can weaken your financial health. With right decisions, a little wisdom and discipline, you can not only avoid these mistakes but also create a strong financial future. Remember, earning money is important, but handling it properly is even more important.
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