The Buyt Desk
To achieve your financial goals you need to save money and invest it properly. Right from the day, you start earning do not start spending extravagantly. It is necessary that you restrict your expenses based on your earnings. Saving money is important so that it can be invested in a good portfolio. Planning financial goals is the first task and based on this you can plan your investment. But investments can be made only when you save money. Invest the money you saved to cover all your risks. Always plan for tax saving investments and the one which generates good returns. If you fail to invest, the money will lose its purchasing power in a few years. You can reach your financial goals easily when you make good investments. Many make mistakes in saving money and while investing. Let us look into this in detail.
What are the financial mistakes to avoid while achieving financial goals?
There are 2 major financial mistakes people make financially which will hinder them from achieving their financial goals. To save a good amount of money and generate good returns on investments, you should prevent yourself from committing the below mistakes.
1. Mistakes in saving money
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Not keeping track of actual expenses – You will be spending all your money on redundant things if you do not keep track of your everyday expenses. Keeping track will help you spend only on necessities and excess spending can be avoided. Set a target budget and keep your spending within the range.
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Not building an emergency fund – You need to keep aside some portion of your earnings as an emergency fund. And you need to keep building this as your expenses will be increasing year on year. This fund will help you in emergency situations without panicking. Not having an emergency fund forces you to take a loan at a higher interest rate in case of emergency and disturbs your financial plan.
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Buying expensive products – Expensive latest gadgets are a new fad. Buying such products in peak season will be too costly and you will end up spending a lot. Yes, you can survive and be happy even without such products and wait till it is in discount sale.
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Not negotiating – Negotiate well when you do shopping, try to get it at a lower price. By doing so, you will be saving some money. Buy when there is a sale running or have cashback offers.
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Not restricting useless spending – Stay away from subscriptions, services and features that are not a must. Buy only the one that is necessary for your living. Avoid unnecessary expenses.
2. Mistakes in Investing the saved money
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Not having a diversified portfolio – Financial advisors say to not put all eggs in the same basket, which means that you should not put all your money in a single financial instrument. When investing in equity, do not put all your money in one so that you will not lose everything at once. Always diversify your investment by putting your money in different instruments. If one fails, you will still have others that will be generating money.
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Being very conservative – You should be taking some risk when investing. Not all your money can be invested in zero risk instruments. Zero risk investments do not have good returns and this capital fund will slowly lose the power of purchasing as it is much less than the inflation rate after taxation. If you are a very conservative investor, you will remain stagnant as your money is not growing.
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Not aware of compounding power – Invest in instruments that give compounding returns. You may not feel much difference in the initial 2-3 years but it makes a huge difference thereafter. Your money will literally double in very less time when compounding happens. If you understand the power of compounding, you can grow your money.
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Being an over-enthusiastic risk-taker – An investment plan can be considered good if it helps you progress towards your financial goal as per the plan with minimum risk. If you take a higher risk to get higher returns and lose your money, you will be off track to reaching your financial goal.
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Falling for quick returns – Long term goals should be a major portion of your investment plan. Do not invest a big chunk in a quick gains scheme as there is a high chance of losing all the money. Long term investments usually give good returns and are at very low risk.
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Not taking professional help – You need to do good planning for the long term to achieve your financial goals. Taking advice from a professional financial advisor is always good, especially when you are planning to invest in a volatile market.
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Not investing in learning – Invest some money and time to learn how to grow money and investment strategies. This will make your journey easy as you will be making well-informed decisions.
