“What money mistakes have you made?”, my friend asked casually.
“Well, tons of them”, was my confession.
“Really.”
“Oh Yes!”
“Would you share them?”
“Of course.”
10 money mistakes that you should avoid
Here are the money mistakes that I made, some of my friends made but probably you shouldn’t.
- Let money sit idle in a bank account earning 4%
- Go swayed by greed and get rich quick schemes
- Excessive use of credit card, revolving payments and interest piling up
- Invest all savings into fixed deposits
- Do not have goals and a plan
- Put all money into stocks and trade
- Make tax-saving your reason to invest
- Do not make yourself aware about money
- Try to time the market – when to invest, when to get out
- Don’t know the status of your portfolio
“A well-lived life is not only about DOs but DO NOTs as well.”
Between You and Me: Have you made any money mistakes? Would you like to share to help others prevent them? Yes? Great. The comment section is waiting for you.
Thankfully, I made my biggest mistakes in college.
When I joined IIT, I got a stipend of 5K a month, which is the first time in my life that I had so many money, that too money of my own. I spent most of it, living a comfortable and happy student life.
Towards the end of the course, I was told that the stipend for the last 4 months or so will be delayed, until long after graduation. Thankfully, I had two credit cards, so I lived off them, not even paying the minimum balance. When I left college and moved to Bangalore, I had tons of expenses with setting up a house and so on, which I had to borrow from relatives since I’d long maxed out my cards. I realised, for example, that I get paid for the first month of work only after the month is up, which created a problem: How do you survive for 4-5 weeks? Anyway, once I earned my salary, I dutifully repayed both credit cards and my relatives, and things have been good since.
Thinking about it, there are many lessons to learn:
– You need a buffer of a few months income. If you make 5K a month, you need 20K in a bank account.
– Your expenses should be less than your income.
– Don’t assume your income will continue to come in every month.
– Don’t assume your expenses will stay what they are.
– You need an income significantly higher than your needs, to have a happy life. If your needs are 3K a month, you need an income of 4-5K. Otherwise you have to budget for every rupee and it becomes stressful and no fun.
– It’s good to have multiple options, like a credit card to draw on when needed. If Citibank and ICICI hadn’t approached me, I wouldn’t have signed up for a credit card. I didn’t even know that students are eligible for credit cards. I thought you have to work to have one. Thanks to them for offering me the cards, because it saved me financially.
– You shouldn’t use your credit card 🙂 In fact, I just set a reminder to cancel one of my credit cards before they start charging an annual fee. No need to pay others when I can use my debit card.
– The financial services industry will help out in some situations of need, but for a high price, not disclosed up front. For example, I didn’t know that if you have multiple outstanding debts on your credit card at different interest rates, your payments first go to the ones with least interest rate. Another lesson is that a 2% annual interest rate on a credit card compounds to much more than 24% p.a.
– Banks are inefficient. Citibank offered me a personal loan, which I took, but the money didn’t arrive in the promised time. After I borrowed from a relative, I told them to cancel it, but the cheque came after that. I ended up feeling that Citibank is incompetent. Little did I know that that’s just the start.
Thanks for sharing Kartick. I can identify with quite a few of the points.
one should use wallets for online purchases,recharge, bill payments, and payments at superstores..saved a lot from it
Thanks for sharing Suman.