Finances are indisputably as important as the physical wellbeing of an individual. The care that one takes on physical front during his youth helps him throughout his life. Similarly, being careful on finances right from the time one starts learning go a long way in attaining financial well being and achieving financial freedom. Following is the list of 5 most errors that one makes during earlier stage of career and should be avoided under all circumstances.
Not being investment savvy
Post completion of studies and getting regular credits into account leaves a host of youngsters with the sense of achievement. The freedom to utilize the money in way they wish to, the spends on what one likes takes precedence over what should be done. Not being savvy on investments in 20s lead to a lot of loss. The young ones need to understand that there is immense power in compounding. A small investment made every month will swell into a large to very large corpus over years. Failure to starting investment right from the first income is a wrong decision.
It has also been observed that the youth delays purchase of insurance. Not only does it exposes one’s family to the peril of losses in the event of untoward situation but also ends up paying a higher premium throughout the life. A higher premium also dents the opportunity to save more.
Also, not investing in the right instruments can also lead to substantial losses. Investing into right products will help in attaining the financial objectives.
Overspending on cars
Car is something that excites the youngsters. While owning a vehicle adds to both convenience and productivity (in case the job demands), the 20 something individuals should refrain from overspending on the cards. The fact remains that this is a depreciating asset and the cost of the vehicle reduces immediately the moment car rolls out of the showroom.
Spending the bonus on travel
Bonuses add to a lot of excitement in life. Bonus month is one that every single working person looks forward to since it provides gratification of year long hard work. However, the feeling of work hard – party hard seeps in invariably at this time. This leads to spending most of the bonus on entertainment, gifts or travel. While one has to enjoy life, but first and foremost the financial strength needs to be gained. Creating an exigency fund should be the top priority and if any money is left can be utilized for entertainment if not getting invested. Neglecting the fund requirements on account of unforeseen events in future is one mistake that can cost dearly.
Maxing out on the credit cards
Credit cards are a phenomenal product that give the holder flexibility to use now and pay later. However, akin to the famous saying that every coin has two sides, even the cards have a darker side. If not used judiciously, the cards have the capability to push the holder into debt trap. Card being the first credit instrument, many youngsters do not understand the nuances and go overboard. Maxing out on the prescribed limits not only exposes themselves to high and expensive credit but also impacts the credit profile.
Not keeping a track of credit profile
Credit and an integral part of our lives today. A good credit profile is must for one to have seamless access to loans and other forms of credit products. The youngsters need to understand that they will be required to manage and maintain a good credit score. And to be able to avoid becoming a victim of low CIBIL score, they would need to keep a track of same. Regular checks on the score will only help them in getting access to cheaper high ticket loans which traditionally is taken only after few years of work (generally when one crosses 30 years of age). Keeping a check on the score will also facilitate prudent use of credit
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