In every phase of your life, be it ‘bachpan’, ‘jawaani’ or ‘budhaapa’ (childhood, youngster or old-age), you have to make certain money-related i.e. financial decisions. Here are some of the biggest money mistakes we make decade by decade.
Not to scare you or anything, but these decisions can and do determine the quality of your life later on. They can very easily make or break your financial situation in the future.
Be that as it may, it tends to be difficult to think ahead, particularly when your current income is not a very lavish sum.
But sadly, this lack of the ability to think ahead makes us scramble for even a single rupee to make up for our childhood mistakes.
Regardless of how careful you are/were while investing during your 20s and 30s, circumstances change and new challenges emerge.
However, as you grow older, your financial position strengthens (fingers crossed). With an increased financial security, you will have an increased impulse to make expensive purchases.
But before doing this, you must understand that burning your pocket on exorbitant things can either give you huge financial returns or can become the reason behind your constant headaches. It all depends on the choices you make.
Childhood: Lack of Financial Education
____ is the power house of the cell.
I am sure more than 90% of the readers will know its answer: Mitochondria.
Let me ask you another question.
What is NEFT?
I am sure 90% of the readers will not know its answer: in layman terms, it’s net banking.
This difference exists thanks to the Indian education system.
It is unfortunate how the Indian education system does not offer financial education of any sorts. A 12th pass student will definitely know what Pythagoras Theorem is, but will not know how to fill out a check.
All this practical financial knowledge is dependent upon a child’s home environment. It is the duty of parents and guardians to teach their children the importance of saving, investing, banking etc.
Financial education is becoming increasingly important nowadays. This is because children have started earning early on in their college through innovative measures like work-from-home and part-time internships. Hence, it is important to give them a reality check before they go out and start earning.
Initially, kids may think that they are making good money when their monthly income is currently 12,000/-
It is essential that they realize that their monthly expenses which include rent, food, electricity etc. are 25,000/- and that currently they are only earning half of what their bare minimum expenses are.
It’s essential that parents make their children realize the actual cost of supporting themselves.
What’s more, it’s never too soon to inculcate the great habit of saving in your children since it is believed that our cash personalities (whether savers or spenders) develop early.
Start teaching your kids now about savings so that this does not become the biggest money mistakes of their lives.
20s: Too Little Savings
The 20s are a crucial phase in our lives. Everyone thinks of graduating college (finally!) and shifting out of their parents’ home for a job.
For the gen X, this change is often a costly affair.
Indian youngsters in their college years often do not save much money and the result is that they have absolutely zero savings by the time they graduate.
What’s more, when they begin their job/business initially, they are not left with much savings given:
- Low income in the first place
- Lack of zeal to save
- Lack of investing
- Repayment of student loan
- Procrastinating nature
To know how to start saving since your college years, read How to save money as a student?
30s: Exorbitant Spending
By the time you turn 30, (I know everyone is like Joey, nobody wants to turn 30 but it’s not a choice!)
Back again to the topic at hand, by the time you turn 30 and are in your 30s, you may have developed a higher level of income which allows you to spend cash without worrying. And we end up making the money mistakes yet again.
It may entice you to spend your hard-earned money on something exorbitant like the latest iPhone, an expensive smart watch, new speakers, bigger car and this list can go on and on and on.
But my advice is, don’t.
The reason behind this is simple: these ‘extra luxuries’ tie up a whole lot of money which could very have been invested.
Also, most of these exorbitant purchases come with hidden expenses that you have to continuously incur. For instance, paying for a car is not the end. With a car comes the bill for vehicle insurance, periodic petrol/diesel (which are surely not getting any cheaper) and other related expenses.
There is, however, some spending and investments you must make in your 30s.
Whatever the size of your financial income, you must buy/have a house by the time you enter your 40s.
If you already have a comfortable spot, congratulations!
But if not, you must seriously consider getting this objective checked in your checklist.
But keep in mind, you must not purchase a house which is more than you can afford. Doing this will not only harm your financial health, but can also harm your physical health because to undue stress.
For more on purchasing houses in India, read 7 Home Buying Tips In India
40s: Inadequate Savings
The 40s are typically a period in an average Indian’s life where a person becomes more laid back. This is a time when individuals will purchase more things which act as typical status symbols.
However, this is the exact opposite of what you must do. By buying expensive things, you will only end up turning your own resources into near-dead investments.
Rather, your 40s must be dedicated towards growing your retirement fund.
In your 40s, you must aim for aggressive investments that offer you higher returns rather than opting for conservative investments. Stop making this money mistakes and start saving at an early age.
50s: Too much for the children, too little for you
50s can be a bit overwhelming, especially if you have kids. In the pursuit of fulfilling their requests and demands, you may skip paying attention to building your retirement fund. This is the money mistake we make.
Numerous individuals discover their funds to be affected by school educational cost and other expenses for their kids.
The key aspect here is to balance various costs and expenses.
Also, you must abstain from making any more aggressive investments. In fact, now your portfolio should shift to a conservative one in order to avoid risks like stock market crash, economy crash, loss of income etc.
60s: Biggest Money Mistake – Inadequate Retirement Funds
In their mid-60s, numerous individuals wrongly leave their jobs before they have spared enough to cover their costs and provide for their own retirement.
This wrong step can seriously affect your standard of living after retirement.
Another mistake individuals make is that they fail to diversify their portfolio. This can have a large effect on your investment income in the future.
To make savings easier try out the Bachat app.
70s and more: Buried under inflation and Debt
There is a problem with Indian retirement planning. People have a major portion of their income as fixed. Fixed income has a problem: it cannot be modified as per inflation. This fixed income could be in the form of bonds, pension etc.
The youth must understand that their retirement funds need to last longer and stronger.
Stronger as in their retirement funds must have a provision of providing inflation-adjusted return.
Apart from inflation, another monster in retirement is debt. You must avoid carrying your debt obligation beyond your 60s lest you will be pressured by its burden wayyy too much.
Start working on how you can avoid these money mistakes.
With these smart financial tips, get ready to age smarter!
Regardless of how careful you are/were while investing during your 20s and 30s, circumstances change and new challenges emerge. However, as you grow older, your financial position strengthens (fingers crossed). With an increased financial security, you will have an increased impulse to make expensive purchases. But before doing this, you must understand that burning your pocket on exorbitant things can either give you huge financial returns or can become the reason behind your constant headaches. It all depends on the choices you make.
Some of the most common money mistakes include: Lack of Financial Education, Too Little Savings ,Exorbitant Spending, Too much for the children, too little for you, Inadequate Retirement Funds, Buried under inflation and Debt