There is a demon in each one of us. There is hardly anyone who can boast of life sans demons, especially financial demons that ruin the chances of amassing enough for a financially secure future. Numerous individuals fall prey to behaviours that lead them into financial difficulties, even when confronted with unfavourable situations. Such behaviours may encompass:
Recklessly extravagant
Slow to earn; quick to spend. This is a habit that has destroyed so many families and caused so many of them to experience financial ruin. In today’s age of modern technology, spending money has become more convenient than ever. With a simple card swipe, mouse click, or smartphone tap, we can effortlessly disburse thousands of rupees.
Nevertheless, the process of earning money has not grown any simpler. This underscores the significance of practising mindfulness when it comes to our spending patterns and ensuring that we do not exceed our financial means. Regardless of the simplicity with which money can be spent, the process of earning it is not becoming any more effortless.
Ignoring the need for a budget
As famously said by George Washington, “We must consult our means rather than our wishes”, the need to save and preserve enough starts with the intent to have a budget in place. A budget transcends mere numbers on a page; it encapsulates our dreams and aspirations for a brighter future. It not only tracks our income and expenses but also serves as a cautionary guide, preventing us from exceeding certain limits when making spending decisions.
Budgeting involves directing your money intentionally rather than pondering where it vanished. It assists in distinguishing between vital and non-essential expenditures while also cautioning against overspending that surpasses your income. Nevertheless, some individuals overlook the importance of setting a budget and spending their money without monitoring how, when, and where it’s used. This can result in a significant and widespread impact on their bank accounts.
Not investing enough
Saving alone isn’t sufficient; you must invest your money to generate returns and facilitate its growth. Though saving money is crucial, it alone falls short because inflation erodes the buying power of money as time passes. To safeguard the purchasing power of your savings, it’s imperative to make wise investment choices.
The initial stage in money investment involves aligning your investments with your financial objectives. It’s crucial to determine where and how much money should be allocated for a financially secure future. Once you’ve made these investment decisions, you can consider automating your financial processes. Create automated transfers from your checking account to your savings and investment accounts. This ensures consistent saving and investing without the need for constant deliberation.
Certain individuals disregard the concept of money investment and persist in their practice of hoarding cash in savings accounts. The paltry interest rates on these accounts result in the erosion of the money’s value over time, ultimately leading to unanticipated financial setbacks in the long term.
Not buying a life insurance policy
Those who doubt the significance of acquiring a life insurance policy should be prompted to reflect on whether they have adequately safeguarded the financial well-being of their loved ones. Your family’s reliance on you extends beyond your lifetime, and you undoubtedly want to provide for them. Furthermore, you wouldn’t want your family to grapple with financial obligations in times of hardship. By selecting the appropriate life insurance policy, you can ensure that any outstanding debts, such as a mortgage, car loan, personal loan, or credit card balance, will be covered.
Life insurance offers a means to leave a lasting legacy for your family or a cherished charity. It can serve as a vehicle for supporting future generations or contributing to a cause close to your heart. Certain life insurance policies, like whole life insurance, possess a cash value that has the potential to appreciate over time. You can tap into this cash value while you’re alive, either through loans or withdrawals. This presents an opportunity to save for retirement or enhance your retirement income.
Additionally, life insurance plays a role in safeguarding your assets. If you possess a business or other valuable assets, life insurance can serve as a protective shield in the event of your demise. For instance, in the case of business ownership, life insurance can ensure the continued operation of the business following your passing.
However, some are too quick to denigrate life insurance as another boring investment option that can be done without. Its importance in one’s investment portfolio becomes evident only in case of sudden death or disease or any event spelling unforeseen and unprecedented loss of income.
Relying on debt
“Who goes a borrowing, goes a sorrowing” is a much-used proverb used to describe how the habit of incurring debt can cause so many people to reel under its burden.
Lending nourishes bad feelings. You know that you must repay, be it today or tomorrow or the day after. The practice of borrowing money through loans can be precarious, particularly when done without responsible management. When you take out a loan, you are essentially obtaining funds from a lender with the commitment to repay the borrowed amount, along with interest, within a specified timeframe. Failure to make timely loan payments can result in adverse effects on your credit score and lead to various financial repercussions.
Certain valid reasons exist for acquiring loans, such as for home purchases or business startups. Nonetheless, it is crucial to only pursue loans that align with your capacity to manage repayment.
The accessibility of personal loans, unsecured credit cards, and “Buy now, pay later” schemes has led today’s generation to lean on credit unnecessarily. Not all credit-based borrowing is detrimental, but the inability to distinguish between essential and non-essential purchases can have detrimental effects on your financial well-being.
How you spend does reflect your idea of lifestyle but only when you know why you want to portray a certain image rather than just loosening your purse strings mindlessly.
The financial demons that we face in our daily lives are numerous. However, each of these demons can be slayed with solutions depending on how quickly you wish to tackle your financial woes. This Dussehra, let us not just burn crackers that make noise but also the evil fiends in each one of us that refrains us from respecting money for its value and utility.
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Updated: 24 Oct 2023, 04:09 PM IST