Everyone has some financial bad habits or we call them as
sins which stops us to be wealthy and financial independent, let us find them
out and also the way to comes out of it.
1. GREED
We all want to earn high returns, but
understanding the risks is not everyone’s cup of tea. For example: Investing in
stocks is risky but can be very rewarding if done carefully and in a
disciplined manner. But dabbling in futures and options is usually ruinous for
the small investor.
How to beat it
It is better that we should buy
equities through mutual funds, if we don’t have much know. Futures and options
are not for common investors.
2. FEAR
At one side greed makes investors
overlook the risks involved and on the other side fear makes people blind to
the opportunities. Fear of losing money makes investors shun the potential of
equities and pushes them to buy instruments which offer assured but poor
returns.
How to beat it
We should do proper asset allocation based
on our financial goals and then stick to it. Historical data has confirmed that
periodic rebalancing of the portfolio can yield better returns rather than just
sticking to some fix return instruments.
3. ENVY
This is a very common human nature,
we get enamoured when we come to know about our family & friends investments
and the high returns they earned. And by this we start copying their
investments so as to get same benefits.
How to beat it
We should always remember that every
person is different so as their needs and investments, Following in somebody
else’s footsteps may not always deliver the desired results. Past performance
of an investment option is not an assurance of future returns .Investments
should be customised to the needs and risk appetite of an individual. What
worked for someone in a certain situation may not work for everyone.
4, WASTEFULNESS
In today’s consumerism wasteful
spending is a common problem, especially for youngsters. Online shopping has further
fuelled this malaise. Young people want to buy the latest gadgets and new
apparel, without thinking about it’s the impact on their finances.
How to beat it
If we are earning then we would be
spending also but it should be within limits. We can set a budget to ensure
that we don’t overspend and stick to it. We can us budgeting apps which can
send alerts if we spend beyond a limit on any head.
5. PRIDE
Some time we get emotional to certain
investments with a feeling that selling an investment at a loss would make them
appear stupid. And then we try to justify that it was a right decision and are
willing to hold it till it recoups its losses.
How to beat it
We should never fall in love with our
investments It is silly to let our ego define your financial choices. If a
stock has no future, dump it and cut the losses. If we continue holding it, the
losses will only grow bigger.
6. BLIND FAITH
Sometimes we get into the trap of a smart
salesperson who miss-sells financial products for his own benefits/targets as
we believe too much on some people and don’t try to find out the nitty-gritties
of the products. .
How to beat it
We need to ask questions and do our
own research and don’t take a decision in a hurry or because there is a
deadline approaching. We should spend some time to compare its features, read
up the terms and assess its utility in your portfolio.
7. LUST
The temptation to make easy money can
make even smart people part with money or bank/credit card details. Now day’s
online frauds are very common; fraudsters cheat people by promising them a huge
share in their inheritance, stock tips or bargain offers on their credit cards/insurance
policies etc.
How to beat it
Always remember that there are no
free lunches in this world and if someone is offering most probably he is a
cheat. We should never believe fraudsters who promise money for doing nothing.
8. IMPATIENCE
In today’s world we all want the
results at the click of the button. However in the investments time is the key,
impatience prevents us from earning high returns. Early withdrawals from the investment
kitty cuts down the power of compounding. Selling off a stock or equity fund
too soon will help book profits but give us a serious wealth.
How to beat it
We should invest with a proper plan
and time horizon. Don't sell as it has given some profits, Assess the real
reasons for selling and Sell only if we need the money or have some better
options to reinvest the proceedings.
9. LAZINESS
Procrastination is a common problem
and many times we feel that things will get right on its own. However delaying investments
can cost a lot. If our money idles in a savings bank account, it loses value.
In five years, even a modest 5% inflation will reduce the value of ₹1 lakh to
less than ₹78350.
How to beat it
We should start SIPs in mutual funds and
sift the extra money from saving accounts to liquid/ultra-short term funds. Now
days it’s very easy to invest through online platforms and we can do in automated
way. This will ensure that the amount gets invested every month.
10. FORGETFULNESS
It is a very common problem that we
forget paying our bills on time which leads to some delay penalty of ₹100-200
to serious penalties running into thousands of rupees. If we miss an EMI or a
credit card bill, we will be slapped with interest, late payment charges and
also the taxes. But if we miss the tax filing deadline or an insurance premium,
it can be in serious issue.
How to beat it
If we can’t remember or disciplined
to make payments on time, then we should opt for auto debit facilities offered
by most of the billing/credit card companies. We can also put alerts for
important dates like insurance premiums and GST/IT returns etc. Just as
automating SIPs and recurring deposits ensures that we don’t miss investment
targets, putting bills on auto payment mode means you don’t miss payment
deadlines.
