Updated: 6 days ago
"If you don't know how to care for money, money will stay away from you." - Robert T. Kiyosaki
And we don't want that, right?
In this post, we discuss three rookie mistakes you are likely to be making along with ways to rectify them and manage your money better.
Mistake #1: Spending > Earning
To err is human. Weaknesses are human too. So are money weaknesses.
If we keep succumbing to our money weaknesses, we would have accumulated a mountain of debt before we realize. We either have to earn more or spend less to avoid a debt trap.
Hence, it becomes super important to keep a close watch on our spending and saving habits.
As a rule of thumb, always remember to save more than enough before you spend.
It is so important to save because everything adds up after years. Small amounts eventually amount to a huge number and can make an impactful difference.
It's hard ( we feel you ), but it is wise to brush aside your weaknesses and cut out on expenses that don't serve you. Believe it or not, the average Indian may lose up to 1 crore in a lifetime by making the wrong choices for his goals.
A smart, efficient, and holistic plan is all you need to stay on top of your finances effortlessly.
" Do not save what is left after spending, but spend what is left after saving. " - Warren Buffet
Mistake #2: Imbalance in Investments
Growing your money is as important as saving it. Thinking through the difference between an investment and an expense is just as important.
The word "investing" has connotations of financial investments alone. However, there are several other avenues in which you could be "investing", that have a direct impact on your financial and overall life.
First things first, let's look at the different types of financial investments. There are stocks (equity), bonds (debt), mutual funds, options, annuities, retirement plans, commodities, cryptocurrencies, and so on.
Decide what kind of investor you are. Conservative, moderate, or risky?.
While evaluating any investment, bear these three parameters in mind.
Liquidity - How easily you can withdraw the money in case of emergency
Risk - Chances of losing the money
Returns - How much will the money grow
Decide what options work best for you and try to strike a balance. Optimization is key. Here is a resource to help you understand where to invest your money.
Moving to the other not-so-often discussed ones, two of the best-paying investments are Health & Personal Growth. Productive investments, in turn, increase your financial wellness. Apparently counter-intuitive, is it? Not really. Well, we leave the thinking to you.
"The best investment you can make is in yourself. The more you learn, the more you will earn." - Warren Buffet
Pro Tip: Here's our yardstick for distinguishing an investment from an expense.
If what you purchase is going to make you more productive, healthier, fitter, wiser, or more skillful, then it is undoubtedly more than worth it. Discover what you need to add value to your life, and invest in it guilt-free.
Mistake #3: Budgeting Guidelines that don't serve your Goals
We have a myriad of necessities and desires. We have a few important financial goals to accomplish. How much to allocate for each of them? How to distribute amongst the various needs and obligations?
The famous 50-30-20 budgeting technique is a common rule for planning ( 50% of your after-tax income is used for your needs and obligations while 30% for savings and clearing debts and remaining 20% for your wants).
As a general rule of thumb, it is prescribed to not spend more than 25% on rent, 15% on food, 10% on entertainment, and 5% on vacation.
However, no two people have the same fingerprint, not even twins. No two people are exactly the same. You are unique, like your fingerprint. Your goals are as unique as you are. And it is you have to plan your goals in such a way that you reach them as effortlessly and peacefully as possible.
In today's fast-paced ever-changing world, innumerable factors and variables come into play in every goal you set for yourself. For instance, crucial factors such as inflation, market volatility, tax fluctuations are almost always overlooked.
A suitable technology-driven platform that places the power of deep financial planning in your hands can serve you to your goals. Discover such a platform here.
We hope this post gave you a fresh perspective on avoiding few not-so-commonly discussed rookie mistakes a beginner maybe making while managing their money.
Happy Money Management to you!
Happy & Healthy Finances! Happy & Healthy You!