Hi Readers,
I am going to high light some of the common errors that are generally committed by youth while planning their financial requirement.
1-Unclear Goals :- Most of the youth generally set no goals with respect to finance. Everyone needs to set a financial goal and accordingly should work to achieve that. Goals could be marriage, purchase of house, child's education etc.
2- Keeping money idle in Saving Bank :- This is very common practice of youth. With hectic work environment and laziness, people tend to accumulate a lot of money in their saving bank account. Suddenly, they realize there is too much money lying idle in their bank account. This leads to impulse buying and affects their financial goals
3- No Clear Investment Objective :- There is no proper method that youth generally adapt and stick to when its about financial goals to achieve. They do it by themselves and mostly not structured well. They do not follow any comprehensive plan and stick to it. You need to map the mutual funds, life insurance and bank deposits when you plan for the future.
4-Getting into unplanned loans and debts :- Most of the loans can be avoided by postponing purchase. Youth get attracted to EMI and other installment schemes that are provided by the retailer and tend to spend their future income. Whenever the interest rate goes up, the worries associated also goes up. Retaining same EMI and increasing loan tenure aggregates to this process.
5- Improper Risk Management :- Everyone needs to evaluate their risk taking ability. You need align your risk with your financial goals. It is advisable to take more risk when you are young and gradually reduce it with your age as your risk taking ability reduces. However, the general mistake people do is, when young they least bother about financial goals and when they wake up and plan for their goals it is already late. In order to meet their financial goal they take more risk at a later stage in life. This should be avoided strictly. It is essential to judiciously take risk, so that you never have to regret for it in life.
6- Ignoring insurance :- Most of the people in India are not adequately insured. Most people take up insurance policy to save tax and they search for options where return would be more. However, at this time they forget the fundamental of insurance. Insurance is taken for your family, not for you. Insurance is meant to fulfill your family need in absence of you. There is a lot of tools available in market that can provide you with good returns and you need not have to think of the returns when taking up insurance. Instead look for insurance which could meet up the needs of your family and also check the claim settlement ratio while you take up a policy. It is advisable to do some research before taking up any policy and not be influenced by what the agent say. There could be many clauses that agents would not disclose at the time of selling, and which leads to poor claim settlement.
7- Back-up plan :- Everyone should have a backup plan to meet your needs in case of any reduction in pay or retrenchment or business loss.
8- No proper communication with family members regarding money matter :- Traditionally, the male members or the bread earning member never used to discuss the financial difficulties and achievements with their spouse and children. However, in this modern age, your family should know where and how you are planning the finance. This is also upsetting the financial plan since the cash flow will be affected in case of any emergency.
9- Liquidity :- Most of the people tend to keep too much of cash. You should periodically check into this and evaluate your budget and plan accordingly and invest your money.
10- Inflation bites :- Most of the people tend to save and not invest. With less investment, inflation goes high.This affects the people who tend to save more compared to investment.
I am going to high light some of the common errors that are generally committed by youth while planning their financial requirement.
1-Unclear Goals :- Most of the youth generally set no goals with respect to finance. Everyone needs to set a financial goal and accordingly should work to achieve that. Goals could be marriage, purchase of house, child's education etc.
2- Keeping money idle in Saving Bank :- This is very common practice of youth. With hectic work environment and laziness, people tend to accumulate a lot of money in their saving bank account. Suddenly, they realize there is too much money lying idle in their bank account. This leads to impulse buying and affects their financial goals
3- No Clear Investment Objective :- There is no proper method that youth generally adapt and stick to when its about financial goals to achieve. They do it by themselves and mostly not structured well. They do not follow any comprehensive plan and stick to it. You need to map the mutual funds, life insurance and bank deposits when you plan for the future.
4-Getting into unplanned loans and debts :- Most of the loans can be avoided by postponing purchase. Youth get attracted to EMI and other installment schemes that are provided by the retailer and tend to spend their future income. Whenever the interest rate goes up, the worries associated also goes up. Retaining same EMI and increasing loan tenure aggregates to this process.
5- Improper Risk Management :- Everyone needs to evaluate their risk taking ability. You need align your risk with your financial goals. It is advisable to take more risk when you are young and gradually reduce it with your age as your risk taking ability reduces. However, the general mistake people do is, when young they least bother about financial goals and when they wake up and plan for their goals it is already late. In order to meet their financial goal they take more risk at a later stage in life. This should be avoided strictly. It is essential to judiciously take risk, so that you never have to regret for it in life.
6- Ignoring insurance :- Most of the people in India are not adequately insured. Most people take up insurance policy to save tax and they search for options where return would be more. However, at this time they forget the fundamental of insurance. Insurance is taken for your family, not for you. Insurance is meant to fulfill your family need in absence of you. There is a lot of tools available in market that can provide you with good returns and you need not have to think of the returns when taking up insurance. Instead look for insurance which could meet up the needs of your family and also check the claim settlement ratio while you take up a policy. It is advisable to do some research before taking up any policy and not be influenced by what the agent say. There could be many clauses that agents would not disclose at the time of selling, and which leads to poor claim settlement.
7- Back-up plan :- Everyone should have a backup plan to meet your needs in case of any reduction in pay or retrenchment or business loss.
8- No proper communication with family members regarding money matter :- Traditionally, the male members or the bread earning member never used to discuss the financial difficulties and achievements with their spouse and children. However, in this modern age, your family should know where and how you are planning the finance. This is also upsetting the financial plan since the cash flow will be affected in case of any emergency.
9- Liquidity :- Most of the people tend to keep too much of cash. You should periodically check into this and evaluate your budget and plan accordingly and invest your money.
10- Inflation bites :- Most of the people tend to save and not invest. With less investment, inflation goes high.This affects the people who tend to save more compared to investment.
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