“I do not regret the things I have done, but those I did not do” – Rory Cochrane
I cannot agree more to the statement above. Through a large part of my working 20s I believed that we earn a living to live an enjoyable life in the present. Makes perfect sense. But it was only until recently that I started to think differently. It took a medical emergency in my family to make me realize the importance of financial planning. As I reflect on my past, I realize I made several mistakes, all of which could have been avoided had I thought about the uncertainty that future holds.
Mistake 1: Reckless Expenditure
I never made a budget for my expenses. Spending on anything and everything I ever wanted was my road to happiness. But now I have learnt that it is important to differentiate between what I need and what I want. A careful thought before every purchase we make will uncover the extent of our wasteful spends.
Mistake 2: Inconsistent savings
I never thought about savings. I spent first and then whatever was left at month end amounted to my savings. A recent consultation with a financial advisor coaxed me to take a reverse approach. I now decide the percentage of my salary I want to save and then plan my expenses.
Mistake 3: Saved but not invested
I never looked at money beyond my bank account. Whatever I saved, sat idle in my account, growing only by a meagre 4% every year. As per NSSO data, between 2004 and 2014, the average medical expenditure per hospitalisation for urban patients increased by about 176%. Ever wondered how your bank balance will cater to your future needs? Channelizing our savings into return generating assets is inevitable now.
Mistake 4: No emergency fund
A year back someone asked me if I had an emergency fund. I thought it was a crazy idea to plan for an emergency. But if only such situations came knocking at the door. It is advisable to park at least 6 months of expenses as an emergency fund so that any untoward incidents can be accounted for.
Mistake 5: Excessive use of credit card
My credit card enabled me to defer my payments. So, I seldom had control over how much I was spending. Not to mention, the innumerable defaults I made in repaying my credit card bills. Sometimes, I did not have sufficient money to pay it back and sometimes I just forgot. I now keep just one credit card with a very tight credit limit.
Mistake 6: Got greedy about making quick money in the stock market
My friends used to regularly tell me about how stock market offers opportunities to make quick profits. I saw someone make 30% profit in 8 months and I felt like I am missing out on the rocket to richness. So I immediately invested all my savings in a “tip” I received from one such friend. I had no idea what business that company was in, who managed the company and how did they make money. All I was interested in was my 30% profits. Well, after 3 years, I made a loss of 35%. Anything that is too good to be true, is perhaps not true. Lesson learnt the hard way.
Mistake 7: Got excited about “instant” personal loans
I once got a message that I was eligible for an instant personal loan. I was royally ecstatic. No questions, no checks. I grabbed the opportunity with both hands. Little did I read the footnotes about exorbitant interest rate. Thanks to my financial advisor, I now know the difference between good loans and bad loans.
Mistake 8: Trusted my Provident Fund to be sufficient for my retirement
I had been living under this solemn belief that my PF balance will be more than sufficient for my retirement. No, I did not make any calculations. I was simply assuming that the Government had us covered. But as alarming as it might sound, my PF balance might not cater to even 10% of my needs when I retire. Again, channelizing our savings into return generating assets is inevitable now.
How do we help?
At CAGRfunds, we help you NOT commit any of the above blunders. With a careful analysis of your cash flow and future goals, we tell you how much you need to start saving every month to ensure a comfortable and peaceful future. We also be with you throughout your financial journey to help you manage your financial commitments and make course corrections if required.