A ) Spending more than you should
Sometimes,
people spend impulsively, on things which they do not really need. Just
because, your plastic card is in your wallet and you “might” need it in future
makes you believe that you need to get it right now. A
brand new camera, with a 100 megapixel sensor and a 2000 x zoom is available at
an EMI of just 1999 per month — and suddenly you’re interested in
Photography! An EMI of 2500 a month, for that magical million colour, anorexic
Flat Screen TV creates a magical belief in you that your normal TV at home is
now really blurry these days (not to mention really fat!)
Is
there a need, to splurge on Movies and eat out, every weekend? A regular meal
at home, with a movie on tv is also a good weekend, at times. With many people,
savings occur, only if they are left with any money at the end of the month.
This needs to change – start saving first, then
spend on what’s necessary and then spend on your desires – last. Financial planning does not mean compromising your
dreams or what you love to splurge on; it’s all about knowing what you need and
what you don’t, & knowing it well! .
B ) No Financial Education to Spouse and Kids
Most
people are more comfortable talking about SEX rather than FINANCE to kids (just
kidding.) They don’t feel the need to tell their children that they have bought life insurance for them (the kids) should they be hit by a bus tomorrow
(the parents, not the kids ). Once children reach an
age of maturity like 16 or 17; when they can understand things & reason
well and can take on responsibilities to some extent… Please start telling them
about money and finances. Once you are gone, you can’t even regret.
Kids
should know what your work is & how much you earn. They should be clear on
how you are saving money to fund their education, bike , trips etc. Once they
know about life t it, chances are they will be a lot more supportive, would be
realistic in their demands & stay well within their limits. Kids don’t know
sometimes, how much pain you take in earning money. Most of the times, kids
know your salary and your designation at company and assume the family to be a
“higher middle class” one. Once you tell them about Home loan EMI, Car Loan,
other liabilities,Retirement
Savings, Education Expenses,
Marriage expenses and the medical emergencies for which you are saving, they
will have a better idea about the current situation and they will act
responsibly.
Parents
feel a little uncomfortable, telling their kids these things, as they feel
children are still young and such information will create unnecessary
psychological pressure and they would not talk about their demands and be
unhappy. Parents feel that children should start learning about finance and
applying that knowledge, once they are in a job and start earning. I say, if
your finances and spending habits are messed up today, a big reason could be
that, your parents never talked about finance with you openly. The same applies
to spouses. Imagine, if you had all the knowledge and best practices you have
learned on this blog, 10 years ago; or when you started earning? The situation
would have been very different today, wouldn’t it?
Dont
let this happen to your kids: Teach them!
C) Imbalanced Asset Allocation :-
A lot
of people have a tendency to start working and then never look at, or review
their finances.Tax
Planning is nothing more, than a “signature” on some
form for them. Initiatives from their side are limited to just calling an
“agent” and nothing more. When they finally look back at their finances, they
find that they have 40 Lacs in FD’s and 25 lacs lying in Bank. This happens
a lot with NRI’s working outside the country. These are 35 yrs old who have 90%
in debt or Cash, and 3-4 mutual funds and shares bought in recent years just
for “trying”. This category misses a huge amount of
returns which they could have made with just 4-5 hours of planning or hiring a proper investment consultant.
On the
other hand, there are investors who have no PPF, no FD, no Debt Funds, no
bonds; they just do share trading, buy direct stocks, invest in just Mutual
funds (pure equity). Their imbalanced Asset allocation is
responsible for the huge ups and downs their portfolio takes. One year the
worth of their portfolio will be 10 lacs, the next year it will be 7, then
suddenly it will be 14 lacs the next year. The numbers dance with huge
fluctuations, but at the end of let’s say, a decade, they look back & find
they are nowhere better than their “High debt Instrument” kind of Investor brothers.
D )Buying products from Close One’s
Will
you sell a junk product to yourself if there’s a 35% commission and it will be
a burden to you all your life ? I don’t think so, but if you had to sell it to
your friend, colleague, brother-in-law, sister-in-law, father’s friend etc,
you’d consider it, wouldn’t you? That’s what happens in real life too.
Most
times, the “Best plan” comes from one of your relatives or someone known. STOP
IT PLEASE! A simple NO might hurt your relations with said person, but it will
save you, your hard-earned money, rather than waste it on idiotic products,
which you’ll regret for life 
It’s just common sense that
there are better advisors and consultants than your relatives or a close ones,
unless they themselves are known and respected in the field (of finance).
It’s just common sense that
there are better advisors and consultants than your relatives or a close ones,
unless they themselves are known and respected in the field (of finance).
To be Continue.......................
Nitin Sawant - 9422518694 /9145354545
