8 CLASSICAL WAYS TO DESTROY OUR WEALTH
Welcome to Friday Fisdom ….as the financial year is coming to end…. we have chosen a topic as per our observations on 8 classical ways to destroy our wealth…which we can avoid in the new financial year !!
- Buying insurance policies for investment purpose: Have you invested your money in insurance plan to get a return in future? Out of 100 people we have spoken, 95 have made this mistake.. Very few people understand the difference between term plan, endowment plan, etc. The current age is the age of specialization and we should go to insurance companies only for buying protection for family…
- EMI: I have found that some well educated and well placed individuals have EMI commitments to the brink…for buying extra large houses, luxury vehicles & even foreign travels… majority of them purely because of peer pressure or social media likes attraction…eventually leading to slavery kind of lifestyle..
- No idea about the power of compounding: Everyone has come across the formula of compounding but very few people really understand its power. This is the reason people do not start saving early and hence lose out on the power of compounding. A SIP worth Rs. 10,000 started 20 years back, has grown to almost 3-4 crores, but similar can be the compounding impact, if someone is taking a loan for 20 years – Compounding works both ways …Albert Einstein said that power of compounding is the eighth wonder of the world.
- No track of cash flow: Very few people keep a track of their expenses. Most of them just don’t know where the money is gone. New financial year gives you an opportunity to work on your budgets and plan your cashflows, efficiently.
- No Contingency fund: Not having any extra money in the case of an emergency results in embarrassing situations of borrowing money from friends and relatives. At times people need to break their investments, simply for the lack of not having a contingency fund…
- Low medical insurance: I have seen people losing out the lifetime savings just because they did not take medical insurance. One accident can shatter all financial dreams. Better be insured. Healthcare cost is rising alarmingly and for majority of individuals it is impossible to manage it without insurance.
- Skewed Investments: Some people would invest all their money in real estate, some would invest all the money in gold, some would just keep it in the locker, some would invest all the money in the stock market. Very few people understand the right way of diversifying the investments – Warren Buffet says his 94% of the returns generated are because of right asset allocation …
- Lack of patience: “I can’t wait for my wealth to grow. I want to double my investments in days/ months”.. people think easiest way to do grow fast is leverage…Leveraged investing- be it future or options in stock market or multiple loans for buy a series of real estate. A lot of people lose their lifetime of savings because they don’t have the patience to understand the investment option and are over-confident or over ambitious…
This week’s Fisdom:
Friends the root cause of all the problems in life, is lack of clarity or purpose and if we can simply set a budget for a year… we can generate lot’s of clarity and the life becomes much more enjoyable…
Wishing You all a Prosperous new financial year!!