How to Go Broke…

Making money and investing them may looks like easy but While keeping watch on your finance, there are some mistakes which may looking like small but are infact vary big. Here I am trying to write about some of them.

  1. In my opinion, Not keeping emergency fund or using it for any other reason is biggest mistake. Emergency fund is there for your emergency needs. Like some big health issues, loosing Job or some else. Some experts advocate to make it equal to expenditure of three months. Some say it is better to have six months. First thing you need to make sure is make Emergency fund liquid like some liquid mutual funds or Some different bank account which you can access at any time.
  2. Having Credit Card is good thing. But having too many credit card? Habit of buying so many things by credit card? Paying Credit card bill late? Know how your credit card company is going to categorize how your credit card balance consolidation is rolled over, otherwise you might be in for one of the worst financial mistakes ever. Here I also want to add one more point as not disclosing your PIN to anyone. Some may tell you to share it with your spouse. My view is it is your card. You are bearer of any expenditure and cost of it. So it is your choice.
  3. Listening to Friends or anyone who are clueless about Money. It is like suicide. It is very true that the people surrounding you are making big effect on your habits. If you are living with people having excessive expenditure, it is wrong for your personal finance. Others dont know about yoir situation in bits and part which you know.
  4. Expecting Bailout From Relatives, Friends or even Govt. bailout may look good but not that much attractive. In Fact when you are applying for Bailout, You are accepting some terms and Conditions which may restrict you and your growth. I will go even further. Waiting till the point you need bailout is useles. Why you are waiting?
  5. Buying Expensive Gifts to lure someone. Why? Yes some may say that the person is important for them. Agree. But Buying Expensive gife when it may affect your whole month Budget?
  6. Trying to copy Lifestyle of Mr Mallya. No need to explain further. Yes his lifestyle was great. But now where he is? Is happy and is it possible for him to Roam around freely?
  7. Not Giving Preference to Basic Needs. Food. Clothes. Shelter. Your basic needs. But if you ignore them and keep buying other things. Wrong.
  8. Buying big home, Excessive food, Clothes which are not useful for you. Bog home mean big expenditure. Maintaining, repairing etc need money. Do you have? Yes. Home is asset. But making such big asset which will not make any other use is wrong.
  9. Not Understanding the difference in between Need and want. Maybe I need to keep this on #1. But not an issue. This is important on any place. There are many things we Want. But not all we NEED. understanding the difference in between two will make big change for your personal finance.
  10. Going to Super Mall without any plan. During my college Hostel days. Me and my friends have hobby to go to One stationary mall near us. It was small but holding so many CDs of Video Game. That days teach me this. The mall people will always trying to sell you many things. They will be happy if you buy more. But its your money. You need to decided what to buy and what not to.
  11. Not Making Budget. Again. Sorry for not keeping it in top 5. You dont need to decide for year at time and be rigid about it. But atleast trying it will make some important habits. There are some expenditure which will come without giving any signal. That’s why there is Emergency fund.
  12. Investing the money you need tomorrow. Investing is for more than 5 years. Invest only that much money which you afford to loose and it will not make any big difference on your life today. 
  13. Making Excuses. I think I don’t need to explain this.
  14. Buying every updated Version of the gadgets you use. Have Iphone6? Good. Now want to update ? Why? Isn’t  it also a good Phone?
  15. Not planning for retirement. One of the biggest. May enter into top 3. After 3 years of my own experience with Mutual Funds and stocks, I know that if you choose stocks right, they will help you in managing money. If you dont know about them, then go to mutual funds. another is also right that investing excessive in stocks is wrong. There is way to manage your money. There are some experience and knowledgeable men out there. You may take help from them.
  16. Relying on single source of income. You may make another source of income by any way. I am not the one who advise you on this. Once again. You need to search and work.
  17. Keeping yourself under insured. One of the most dangerous mistake. Again. Choose wisely.
  18. Not taking inflation into account or wrong math. Not your fault. Once again here you need professional help.
  19. Not taking professional help itself is way to go broke. I believe that there are some ways in which you need to take advice from some Professionals. There is some DIY may be available. But it may not work.
  20. Assuming your broker as your financial advisor. He is not. A broker, atleast in indian market is there to only place your orders. He dont know your personal finance like any other Professionals.
  21. Last but not the least. Infact this is biggest sin for me. Accepting all stock tips or your brokerage reports as final and not doing your research. Throwing Annual reports or Form 10 k, or whatever it is called in your country, into dustbin.
  22. Paying of Debt with Saving. There is advantage with Debt WHICH IS UNDER CONTROL. In many countries interest paid on debt is tax free. You can save tax and keep your saving.
  23. Not Going to College. There is big difference in income of average graduate and one who is not graduate. There are many surveys which indicate the same. Infact Raghuram Rajan, Former RBI govr. Also indicate the same thing as reason behind 2008 financial crisis.
  24. Not paying student loans Fast. Reason for such is the more time you take paying debt, bad it is for you. On other hand, paying student loan fast is also wrong. You can utilize your savings and income for better reason like making emergency fund. Ending up with zero debt is Good but ending up with zero savings is Very bad.
  25. Waiting for Investment. Not making due Diligence and so taking bigger risk then you might digest. Time is very important in investment. More time you give to your investment, more it will grow.
  26. Mimicking other investors and Going with trends. Worst mistake you may make. There is no need to hit the ball every time.
  27. Investing in friend or other relatives family business. No need to mention anything else.

    Going to end it with one tweet of Investopedia

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    About Ashutosh Tilak

    Tracking Indian Capital Market since 2010. Finance Student, On this blog I am writing about finance and Investing. You can contact me analystashu@gmail.com or @androidashu & @InsideFinanc on twitter