Everybody loves a blame game.If stock markets crash just after you made your first investment in equity, it’s a bad gamble. When interest rates rise just when you take a home loan, you blame it on your luck.Our bad luck happens all too often!!
As a finance writer earlier and now as a financial planning guide for women, I have come to understand that we choose to multiply our savings with our habits and attitudes and not just due to sheer luck or timing.
I spend a lot of time helping people understand their wealth-obstructing habits. The top five are:
#1. Procrastination:
Close the dormant bank accounts.Visit the post office to encash national saving certificate (NSC). Start a systematic investment into a mutual fund.
Our financialto-do-list just keeps growing. I admit having a long-one as well. Until I got an SMS alert from my bank about low minimum balance in3 out of 4 savings accounts I have, I didn’t realise that I needed to close the dormant ones.
Similarly a cousin in his early forties has been “thinking of an SIP” since the past 5 years.
A few weeks ago, I advised a friend to consolidate her multiple insurance policies into one and invest money in other avenues. She is yet to take out a weekend to figure out the list of the policies she has.
We make great plans but don’t implement it until we realise what is the cost of postponing these decisions.May be I should call up my cousin and say “You just lost the opportunity to earn 14-15% return on your savings”
2. Staying Ignorant:
Our ignorance is a blessing for someone who is lurking around for a big bonus or a commission. Someone who parked their savings into unit-linked insurance plan (ULIP) will very well understand the dangers of ignorance.
These days,bankers give it a fancy name; a savings product with words like guaranteed rate of return thrown into it. Recently a high net worth senior citizen couple in my family were persuaded to open a third bank account along with a Rs 20 lakh commitment into a closed-ended fund for 7 years. The banker came through a friend’s reference so they trusted him.
Staying ignorant these days could easily lead you into a trap of investments not suited for you.
3. Being Fearful Always:
Indeed equities are a very risky asset class. My heart sank when I heard a 22 year old engineering graduate telling me “I would rather put my first job’s savings in fixed deposits otherwise I will lose all of it in shares” The young man wasn’t really convinced about the mutual fund route too. You will have to work really hard for your retirement is what I felt like telling him.
Not that staying away from shares or equity funds is a wrong decision but there are some risks you can take early on in life. At 45, you should think twice about the equity risk you take. At 22, you can atleast try and see what a risky asset looks like.
4. Living a Life others live:
We think owning the latest car or a phone is an absolute necessity, even if it depletes in value the moment we purchase it. For some people I have seen, a palm size tablet phone has got more value than a kids’ education fund.
Instead of our income, or budgets, it’s our office colleagues, relatives and neighbours Facebook posts that decide our expenditure. Whatever is left is what we save instead of it being the other way round.
5.Expecting a Free Ride Always:
Let’s admit that we love bargains and we love free goodies with our grocery bills. But how many times do we really find those goodies worth using? 8 out of 10 times we don’t use it. Same is the case for the free financial advice that you always look out for? A free insurance or the accident cover that comes with credit card or investment plans, may not serve the purpose at all.
A stock broker will tell you to buy a stock that he must have bought two years ago at a much lower price.
But it’s our fickle mind that at times doesn’t want to do our own research and instead look out for someone who can tell us the best insurance policy or a best fund that will double the money at one go.
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