17,000 new credit cards issued by ICICI linked to wrong users

The first and most obvious error is failing to stick to a budget.

Attaining financial freedom is a worthy goal for everyone, and many people list it as a top personal objective. And they are entirely correct because financial insecurity could wreak havoc on one’s mental health. Let’s take a look at things most common errors that stop you from achieving financial freedom.

Lack of budget preparation

The first and most obvious error is failing to stick to a budget. Given our consumer-driven society, it’s easy to fall into the trap of wanting more than one can afford, whether it’s a luxury car or the latest smartphone.

Without a budget, lifestyle expenses can eat away at your potential savings without your knowledge. Therefore, keep an eye on your expenditures and set a limit on discretionary spending. The covid-19-induced lockdown taught many of us how to spend only on necessities and not constantly indulge our wants.

Insurance errors

Whether it’s viewing life insurance as a savings and investment vehicle or relying on an employer-sponsored health plan, people frequently get insurance planning tragically wrong. Almost everyone has at some point owned a unit-linked insurance plan (Ulip), an endowment, or a cash-back plan. These are unacceptable due to their high costs and lengthy tenure.

People are more concerned with the profits an insurance product can generate than with the amount of protection it provides and at what cost. Additionally, people are unaware that insurance is a long-term contract and that the choices they make today will affect them for a lengthy period of time.

That said, when it comes to life insurance, it’s best to keep things simple and choose a term policy with sufficient coverage. Additionally, having enough health insurance for your family and yourself is critical, regardless of what your company provides.

Lack of emergency fund

The lack of an emergency fund has been particularly harsh for people as a result of the Covid-19 crisis, which caused job losses. Further, even individuals who do have a fund may be mismanaging it. Financial experts recommend storing at least six months’ worth of expenses in safe and conveniently accessible assets such as liquid funds and term deposits.

Investing too late

Many people begin their financial planning and investing careers in their 30s or even 40s, but the sooner they begin, the more they can gain from compounding.

Another issue is that financial objectives are not linked to investments. The majority of people do not have a financial plan. Investments are made randomly based on tips or tax savings and are not well thought through, which is a significant issue. This has the potential to have far-reaching consequences.

Determine your short- and long-term objectives first, and then select investment products accordingly. For instance, if your objective is short-term, it makes sense to avoid equities.

Mutual fund maze

Indians have now recognised the benefits of mutual funds and have begun investing via systematic investment plans (SIPs). However, a large number of them are not doing it correctly.

While avoiding equity exposure is still a mistake made by many conservative investors, those who take the risk may endanger their results by failing to conduct enough research or consult a professional.

As an investor, you should select mutual funds based on your financial objectives and risk tolerance, as well as the fund’s performance in comparison to a benchmark.

While the majority of these errors are correctable, the longer you wait, the more your long-term finances will suffer. Therefore, begin by analysing your own financial situation to determine how many of these errors you may be making inadvertently, and then make the required improvements.