While this might seem to be one of those really boring, typical, and done-to-death articles about financial advice even your grandmother can give you, it’s not. We have whipped up a list of financial mistakes you should never make, where you will find contributions of people across sectors and countries, courtesy of this Quora thread.
Some mistakes are too costly to make ourselves, so learn from others and don’t make these mistakes
1. Spending a bomb on your engagement ring or wedding
Jonathan Chen, working at an MNC bank, believes weddings and diamonds are not capital expenditures that will improve the bottom line. He adds that both are total write-offs. And what’s worse is that many people borrow to meet those expenses – adding to a messier scenario.
2. Not diversifying your investments
If you have saved some money to invest in the stock market, financial analyst Efim Shirokorad has the right warning for you. He says, “Many people read popular books on investments, imagine themselves to be Warren Buffett. [Thinking they have chosen] the best stock, they immediately put it in a large amount. And then we are surprised when this stock lags behind the market or brings losses.”
3. Moulding your life around money
Gene Khalyapin, CEO at Perfiqt, says that you must know what’s important in your life and use your finances to achieve that. He adds, “Money is not a goal in itself – it is a tool that helps you live a fulfilling life.”
4. Investing in something you don’t understand
Gary Mishuris, Managing Partner, Chief Investment Officer at Silver Ring Value Partners, believes you must only invest in something that you understand and have confidence in. Don’t go by the claims made by the person selling it to you. Perfectly doable! That relative who sells irresistible schemes? Hear him out but do your research.
5. Not preparing an emergency fund
Paresh Nagore (and all of us at BankBazaar), believe that not having an emergency fund to fulfil unforeseen emergency expenses is one of the biggest financial mistakes you can make. He adds that it’s not difficult to maintain it if you try. On our blog, we tell you all you need to know about getting your emergency fund started.
6. Spending over and above your financial capacity
Adhil Shetty, co-founder of BankBazaar, says that if your income is S$20,000 per month but you spend S$25,000 monthly, you are borrowing S$5,000 from other sources to meet your expenses. Doesn’t need a genius to figure out, that this way, you will end up in an endless cycle of debt.
7. Not investing in yourself
Personal finance blogger Gopal Gidwani says we must constantly keep upgrading our skills and knowledge in general and especially our knowledge of personal finance that will help us invest better. Our recommendation? Read this – 4 Things to Invest in While You Are in Your Mid-20s
8. Indulging in lifestyle inflation
Angela Nguyen, traveller and business owner, says as soon as people get a salary raise, they want to upgrade their lifestyle. From buying cars to designer items, people do everything to ‘keep up’ and live a lifestyle they think they deserve. This is a financial mistake according to her since it will lead to losing one’s ability to keep/generate more wealth.
9. Not having health insurance
Singapore-based Daniel Tay, Director at Master Money Management, believes not buying health insurance is one of the biggest mistakes you can make. He says he has seen instances where having life insurance has been extremely beneficial to people. We have that figured out, here.
10. Lending money to friends and family
While we do this all the time, marketing consultant Max Carter says, “It a great way to not ever see your money again and an even better way to ruin a great relationship.”
Okay, maybe not always. And while we understand that you may want to help, being aware of the risks is important.
11. Not having a budget
Kenya-based Japheth Nyandoro believes that having a budget allows you to be in charge of how you spend your money instead of your money controlling you.
Starting this year? We have some budgeting tips you can use.
12. Ignoring your credit card bills
India-based Sarabdeep Singh says you must avoid rolling over credit card bills since compound interest is almost always harmful. However, we all make mistakes. So, if you are in deep credit card debt, here is what you can do.
13. Not investing in relationships
Although this might look like an odd financial mistake, it really isn’t. Prateek Mehta, CEO and co-founder of Upwardly.in, says, “Investing your time with your loved ones is important. People in stable relationships/social environments earn better, have lower medical costs, and have better overall quality of life.” So, so true!
14. Confusing wants with needs
US-based Len Janssen says many times, we confuse our wants with our needs. Do you really need that new car or want it? Do you really need a smartphone or just want it? These are the type of questions one must ask before making purchases. Being honest about what you really want and what you really need is what Janssen recommends.
Tough choice that one.
15. Marrying a person that doesn’t share your views on money
Business major Pedro Trullenque believes that if both people in a marriage are not on the same page money-wise, money becomes a bigger stress than it generally is. He adds that you should not consider marrying a person who would spend all their or your money overnight, leaving you with no option but to pay the bills.
We hear you. And if you have a materialistic partner, here are some tips to navigate the relationship.
16. Waiting for the right time to start saving
England-based Andrew Frudd says, “As you earn more you will spend more, so you will always be waiting for the ‘right time’ to start saving. There is no right time (although some times are more wrong than others…) so start the pension/saving now.”
17. Planning for short-term instead of long
Ian Sutherland, a 61-year-old engineer, says the biggest mistake he made financially was to plan only for the next 3-5 years instead of the long term. He says one must plan at least a part of their investment for the long term as most rewarding dividends come in the very long term (from 20 to 50 years).
18. Ignoring risk mitigation instruments
Adhil Shetty, our co-founder of BankBazaar says, “There are many uncertainties that can cause deep financial trouble if you don’t have an insurance cover. Do not ignore health, life, and other insurance products.”
19. Not understanding the value of your time
Front-end developer Robert Checco urges you to find out the dollar value of one hour of your time to be successful. If you earn S$50 an hour and commute two hours in the day, you spend about 500 hours commuting to and from work each year. So, if you fail to take advantage of this time, you are wasting around S$25,000 a year, he adds. Something worth pondering over.
20. Not using money-saving apps or tools
Krishnareddy T, a product developer at Amazon, says, “Use some tool/app to keep track of all your expenses, bills etc. so that you don’t have to carry all the records in your brain till you write them somewhere on weekends or month end.” Here are 5 apps you definitely need to get your finances straight.