10 Money Mistakes To Avoid in 2022

In the era of sky-rocketing prices and extravagant lifestyles, managing money is one of the most cumbersome tasks. However, planning in advance and taking proper precautions go a long way. It is essential to understand your income and expenses. This is also a prerequisite for channelising your savings towards suitable investments.
10 Money Mistakes To Avoid in 2022

What is money management?

It is a way to track your expenses, investments, budgets, and tax liabilities. Moreover, this is a calculated approach to get the highest rate of returns from the investment done. Often, you fall into a dilemma about how you should spend your money effectively. Instead, you end up spending on unnecessary things. However, money management is here for your rescue. You can also take help from financial experts.

The wise way to understand money management is by analyzing your mistakes. More importantly, it is crucial to understand others’ mistakes to avoid them altogether. Let us read about the top 10 mistakes to keep away from in 2022.

10 money mistakes to avoid in 2022

Mistake #1: Failing to prepare a proper budget

Budgeting is nothing but getting clarity over how you want to manage your income and expenses. Any task requires proper planning to avoid hiccups along the way. The same goes for your finances. You do not need to be well versed in the technical aspects of accounting to make a budget. Simply take note of your earnings and how much you need to shell out monthly for living expenses. The leftover amount is your savings, which you can invest accordingly.

The most effective rule that you can apply to distribute your budget is the 50/30/20 rule. According to this rule, you can spend 50% of your income fulfilling basic needs such as household essentials and healthcare expenses. 30% of the remaining amount can be used to fulfill your wants. This can be something like traveling fulfill, going out for a nice dinner or movie, and even upgrading your devices. The last 20% is the most crucial. Set out this amount to pay off any pending debts. If you have freed yourself of the burden, you can save or invest the same.

Mistake #2: Not learning your way through the stock market

To invest in the stock market, you require a basic understanding of its functions. More importantly, it would help if you were up to date with what is happening worldwide. All big and small decisions have an impact on the stock market, making it crucial for you to listen to the news every day.

However, not everyone is inclined toward trading every day to make quick profits. You can always buy some reputed shares that are set to gain value over the long term. The earlier you start investing in stocks, the more time you have to generate rewards. Assume you start your investment at Rs. 10,000 each month in a mutual fund with a 10% projected return. After ten years, you would have a total of Rs. 20.65 lakh. Small monthly investments get compounded over time to multiply your wealth.

Learn more about investing in the right stocks based on your risk profile and financial goals from our experts. Download the TejiMandi app for real-time updates from the market.

Mistake #3: Piling debt and putting off repayment

It might be challenging to know where to begin when you have college debts, a vehicle payment, credit card debt, and a mortgage. However, the debt would not go away just by ignoring it. In fact, it just pushes you deeper into the mess of increasing interest rates and diminishing credit scores.

Begin your debt repayment strategy by writing down all of your balances and the interest rates associated with them. Prioritize the ones where the interest rates are high because delaying them further will increase the burden more significantly. If you face difficulty in managing too many loan repayments, consider consolidating your debt. This way, you will just have to focus on repaying the consolidated loan at a single interest rate. This may even lower your overall cost of debt.

Mistake #4: Not safeguarding your life and assets via insurance

Having insurance must come as a priority. Be it insurance for you and your family or one for your assets. Having such security is beneficial in case of any mishap. It provides cover for your dependents, whom you can name as nominees. In case of your demise, your family is given the financial coverage they need by claiming life insurance.

Apart from this, insurance has quite a few monetary benefits. It provides a source of funds in instances of health emergencies or accidents. Moreover, the premium payments are tax-deductible under section 80C and section 10(10D) of the Income Tax Act, 1961. This helps you in reducing your overall tax liability.

Mistake #5: Spending mindlessly

It is of utmost importance to differentiate your wants from your needs. Over time, mindless spending will deplete your pool of savings. Reducing your expenses on unnecessary items and maintaining a fund for the future are key to safeguarding your wealth. While it is not wrong to indulge in spending on activities that improve your standard of living and give you pleasure, it is essential to stay within your spending limit.

Mistake #6: Letting your emotions take over while investing

Keeping emotions in check is crucial for spending, saving, or investing. Sometimes investment can be intuitive. However, intuition is valid when it is backed by years of research, understanding, and experience. Make sure you analyse and weigh all options before putting your money in. Do not let a bad day affect your ability to make sound decisions.

Mistake #7: Ignoring your credit score

A credit score is a rating based on your debt management and repayment history. Apart from this, the balance of secured and unsecured loans and the number of credit cards you own are considered. It is an indicator of how creditworthy you are. Banks and other financial institutions take note of this score before extending you any loan. CIBIL issues the most commonly used credit score in India. It ranges from 300 to 900, with 900 being the best score you can get. A score of 750 is considered good. You must maintain your CIBIL score for receiving seamless funding in case of emergencies.

Mistake #8: Forgetting your financial goals

Any planning is fruitful only if it comes with proper implementation. Your goals can be owning your own house, buying a car, or even starting your own business. Do not forget this for short-term pleasures. In fact, it is crucial to strike a balance between living in the present and saving enough to achieve your goals. You cannot figure out the proper way to spend your hard-earned money until you set any financial goals. So make goals and follow up on those.

Mistake #9: Not planning for your retirement

It is never too early to start planning for your retirement. If you have just started earning, this is the perfect time to lay down an investment strategy that will provide you with maximum returns when you retire. At this age, you have a higher ability to undertake risk. This allows you to invest in volatile assets, such as shares that boost your returns. Another benefit of starting early is that you pay interest at lower rates. This reduces your burden, overall costs, and even your tax liability. Moreover, you get a longer time horizon to multiply the returns on your investment.

However, if you are at a later stage in life, do not worry. While you may have more financial responsibilities now, it is better to start planning than forgetting about them. Invest in a fixed deposit or PPFs. You may also take the benefit from the various Government-backed schemes.

We at TejiMandi help you figure out the perfect retirement strategy that shall allow you to live a comfortable post-retirement life. Read about the right time to start planning for your retirement in our blog here.

Mistake #10: Not having an emergency fund

As the name suggests, an emergency fund is a pool of savings to back you in times of emergency. If your source of income is affected, maybe due to layoffs or a crisis like the pandemic, you shall manage for some time. Another case where you may require this fund is to pay urgent medical bills. No matter how well you plan, not everything is under your control. This is why you must save an amount equivalent to your income of 4-6 months. If that seems like a lot, calculate your monthly expenses and save enough to cover them for half a year.

In conclusion

Everyone makes mistakes. However, the problem arises when you do not learn from them. Now that you are better aware of what can go wrong, make your financial plans well in time.

We at TejiMandi have over 10,000 clients who trust us with their money management and investment decisions. Visit our website to learn more about our services and steer clear of mistakes you can simply avoid.

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