Home >money >calculators >3 money mistakes can kill your future

Late 20s and early 30s are life-changing. It is exciting (because you are financially independent) and at the same time daunting to keep pace with these changes. However, it is in your 20s when you start experiencing real responsibility for the first time. Most of these responsibilities are related to money. Like it or not, know it or not, you have to deal with it. Several young adults make money mistakes owing to lack of knowledge, which can in turn result in financial insecurity.

According to our research, an average individual can’t make more than three major financial mistakes. However, there are cases where the same mistake is repeated very often resulting in a catastrophe. Here are the three common financial mistakes which should be avoided for a smooth financial journey towards your goals.

Mistake 1: Buying a wrong financial product

Most people decide to buy a financial product without understanding if it fulfils the need for which it is being advised. Common mistakes here can be—investing in different asset classes and products without understanding their risk profile, not mapping investments to goals, buying common product for insurance and investment that dilutes the basic purpose of insurance, making you pay a high premium for a lower life cover, taking a high-cost loan for a depreciating asset that leads to higher interest payments and liquidity problems. If you have made this mistake, fixing it is the only remedy. Going back and checking products that you own is important. Hanging on to products that are not conducive leads to more damage as time progresses.

Mistake 2: Seeking advice from wrong people

Wrong financial decisions can prove to be very costly and these wrong decisions are owing to wrong advice. Most people tend to seek advice from friends, families or agents.

It has been observed that 90% of Indians fall into the trap of buying financial products such as insurance from an agent who is only trying to maximise his commission.

Around 85% of people admit that following the advice their friends give has not improved their financial lives. They could be your worst advisors. They would tell you how well they have done for themselves. What they would not tell you is the costly mistakes they have made. Financial advice should be comprehensive, covering every aspect of your life, including family and goals. This can be provided only by professional and qualified financial planner.

Mistake 3: Delaying the obvious

People tend to delay financial decisions, which could prove to be costly. Retirement goal is a common financial decision that is neglected and kept for a later day. In the future, the retirement age could come down from the current 55 years to 45 years.

If the decision is delayed, one would not be able to build a retirement corpus. Someone who starts investing early in right instruments would build a higher corpus by investing a lower amount as the power of compounding is on your side.

Nitin Vyakaranam is founder and CEO, ArthaYantra Corp. Pvt. Ltd

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