As you gain more experience with money and invetments, one realisation just cannot escape you. To be successful, you need to say NO more than you need to say YES.
Basically, your ‘avoid‘ list has to be larger than your ‘embrace‘ list.
However, there are 10 deadly money mistakes that you should avoid at any cost.
- Avoid excessive use of credit cards. The festive sales have started. There are several credit card offers and you are going to be tempted. Will you go for it? Will you have enough to pay the entire bill? Whatever you do, don’t just pay minimum amount every month and revolve credit. You may have to pay very high interest charges – as much as 36% per annum.
- Don’t take many loans. A loan comes at a cost which then increases the cost of your asset/expense. It can be financial ruining as you can enter a debt spiral. Combine credit cards and other loans and you will find yourself in a hole that you may find very tough to come out of.
- Don’t invest only for saving tax. You are likely to fall prey to many tax free products specially in insurance, pitched by your bank. Insurance is best taken for risk protection via term plan and for health insurance.
- Avoid buying another house on loan for tax saving. It is the worst idea ever. The years you can use to build you wealth, you end up spending in paying interest to your bank. The bank gets richer, not you.
- Never buy insurance plans with words such as assured or guaranteed. The guarantees come at a significant downside to your returns. The insurance company gets richer, not you.
- Don’t ever take investment advice from a bank or its relationship managers. A bank is concerned only about its fee / commissions. It doesn’t care about your portfolio. There are millions of bank customers who have suffered from unscrupulous advice.
- Don’t put all your eggs in one basket. If you are putting all your money ONLY in FDs or PPF or Insurance or Equity, you are exposing yourself to all kinds of risks. Yes, an FD or PPF has risk too. It does not protect you from the inflation monster.
- Don’t speculate. Lottery tickets, punting in stocks or buying bitcoins are all examples. You are leaving too much to chance.
- Don’t fall for get rich quick schemes. You can detect them easily as they will sound too good to be true. They are typically structured in a multi level marketing format. If it fails to show you the downside or what can go wrong, it is guaranteed to be a scam.
- Don’t watch financial TV or read newspapers. The news is all about excitement and little substance. They can make your mind and you go bankrupt. Instead read good books, blogs and make yourselves mentally rich.
Add more, if you have to but these remain.
Finally, a positive idea. Learn about investments and how you can use it reach your financial goals, faster. Here’s one course you can use – Investing 101.