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A BIG NO TO THESE FINANCIAL MISTAKES

Posted on Thursday February 14th, 2019

A majority of people have little or no understanding about money management and overall financial health. This can not only prove financial threat to our future, but also can affect ourselves and family. With 2019 upon us, ShubhBank present some common and biggest financial mistakes we all make :

• Not building an emergency fund: The most common financial mistake people make is not preparing for unforeseen emergencies that can result in financial crunch. Having investment plan is usually the focus, with little attention paid to having a plan in place for urgent funds. Situations like a medical emergency or loss of job can lead to financial crisis, if you haven’t built an emergency fund. Most financial experts would advise you to save at least 10% of your monthly income to ensure easy liquidity. When you receive your bonus, put some part of it in this emergency fund and do not spend it on a vacation or on any other luxury.

• Unnecessary spends: Are you surrounded by things that really of no use and regret buying such things within few days after their purchase. You are not alone then, most of people make impulse purchases without putting too much thought into it. One of the most crucial aspects to be in financial discipline is to living well within your means and this requires planning. You must create a shopping list of things you want to buy and put an estimate. Track your spending habits by getting a money management app, that provides you with a detailed analysis of spends.

• Improper Credit Card spending: Some people usually believe in looking for the best deal while purchasing through cash or debit card, but when it comes to transactions through Credit Cards, the tendency is to buy the best quality item. The biggest mistake people make is not paying their entire credit card bill within the due date that attracts a big interest rate on the due amount, and leads to massive financial failure later. Buy things with your Credit Card only when you are sure you will be able to pay off the entire amount by the due date and in case of debt, paying it off should be on your top priority list.

• Lack of planning for the future: It is necessary to start saving early in life for future needs like your child’s education or marriage or your retirement planning. May be these goals seem too far away in the future, and hence, not a priority. This is the biggest mistake people make and at the end when these milestones start approaching, they find themselves totally unprepared. To meet your future goals, you need to begin financial planning from your 20s. The first step of financial planning is to know each of your life-stage goals and then calculate how much money you need to meet these goals.

• Staying unaware of credit score: According to estimates, around 60% of loan applications are rejected due to poor Credit Score. Your Credit Score is one of the biggest factors that banks and other financial institutions evaluate, when you “Apply For a Loan” as it represents your credit worthiness. People usually don’t panic about their Credit Report, since they are not in need. Later on, they may need a home loan for their dream house or they may urgently need a personal loan due to a medical emergency in the family. It is imperative to stay aware of your Credit Score at all times and to maintain a good credit score or improve your credit score, ensure you repay all your debts within time and maintain a credit report.