Earning money is easier than managing the earned money. We all are so obsessed with the earning part that managing part is left unattended. However, it is the managing part which will create wealth for you. Money well-managed is the money working for you without you working for the money. Many people are smart at earning money but when it comes to managing the money, they become careless.
Money mismanagement is a serious issue. Money management is an important skill.
Listed here are some of the ways people mismanaging their money:
1) Not Investing Wisely
Money earned and saved should be invested sensibly. We know how many Bollywood stars of earlier era suffered during their later life sheer by their inability to manage their financials wisely.
Your present earning is not a guarantee of your future earnings. Be shrewd about your money and savings. Invest wisely what you earn and let your money also earn for you.
“Do not save what is left after spending; instead spend what is left after saving.” Warren Buffett
Believe in the wisdom of this great investor and start investment of your savings wisely.
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2) Careless borrowing – Extravagant spending:
“Every time you borrow money, you’re robbing your future self.” Nathan W. Morris
This is a serious practice. Now a day’s loans are available at your doorstep. They are offered with the minimum hassles. You also have tempting marketing campaigns by all the brands. You have your friends sharing pictures of their foreign tours on social media. This is also tempting for you to spend on such expensive tours irrespective of your financial means.
Easy availability of loans and a plethora of lifestyle augmenting options to spend money is a killer combination which can ruin your life. The temptation to borrow is very difficult to resist.
As per the RBI report, 96% of the new loans during the year 17-18 were by way of personal loans
This careless borrowing is dangerous. Not able to repay the loans have serious repercussions. Your CIBIL records can be spoilt and you may not get the loan when you need it desperately for serious financial needs. Having a bad credit record in the young age could be a serious handicap.
Not able to pay credit card dues is also very costly. Not only it spoils your records, but they also charge a huge interest on the outstanding.
Even if you earn enough and need not borrow to spend on your lifestyle expenses, unnecessary expenses spoil your lifestyle. It can become addictive. It can become unsustainable. Money not saved for rainy days makes life miserable.
Say NO to unnecessary loans, say NO to extravagant expenses.
“Beware of little expenses. A small leak will sink a great ship.” Benjamin Franklin
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3) Investing in dubious schemes:
RBI and SEBI have become very stringent about the dubious investment shames. Yet, every now and then there are crooks that take advantage of loopholes in the laws and ignorance of the investors. They come out with attractive investment schemes. Your greed for more return makes them successful.
Remember any schemes offering unreasonable returns are mostly dubious. Ask for the Balance Sheet of the company you are investing in. Most of these dubious companies don’t share their financials with their investors.
Even the best and biggest Indian companies like TCS or Infosys or Reliance Industries share their financials with the investors.
Trust the transparent companies and shun dubious operators with malafide intentions.
4) Not keeping proper records – Not sharing with the spouse:
Most of us do not keep our investments records. This is not a good practice.
You may lose control over your investments and you may lose some money. In the event of your death, your legal heirs would have no idea about all your investments. Either they will struggle to get the information or they will not know. No one would benefit from your investments.
Keep records of all your investments. Keep it up to date. Share these records with your spouse or legal heir. Make a will to avoid legal complications for your heirs.
5) Not covering financial risks:
This is another way people mismanage their money. Yes, not covering your risks can cost you dearly.
Imagine you are told by your doctor to undergo the bypass heart surgery, Your doctor has informed you the estimated cost of surgery of Rs. 5,00,000/-. You do not have medical insurance.
How your savings would be affected by ignoring to have your health insurance?
You believe you are going to live full life up to 90-100 years. Certainly, our and all your well wishers’ best wishes are with you for a long and healthy life. Yet, early age death is a reality and is on the rise. Even seeing many young deaths around you, you do not think early death as a possibility for you. Therefore you have taken no life insurance policy.
Suppose unfortunate incidence happens and you die at the age of just 45. You have a dependent family. What about their financial security? You have your investments but life insurance policy would give them a big relief. Lump sum huge chunk of money can be helpful to manage their monthly survival cost.
Your failing to cover the risk can be costly for your family. Your savings would be depleted as they would need money to survive. An adequate investment in the life insurance policy would have helped your family.
Any risk which can be managed shall be managed as not managing the risk could be financially costly.
These are some of the ways people mismanage their hard-earned money. After earning good amount of money and spending your prime time of life in earning money, living financially miserable life is the nightmare one can think of.
Be smart in earning money and be smarter in managing it.
Share your thoughts. Let’s everyone benefits from your wisdom.