Getting your first paycheck after working hard through the school and college years is the beginning of your journey towards financial independence. You want to live life, follow your dreams, and have a fulfilling career.
However, it is essential to do effective financial planning and money management. A few may overlook the importance of planning from an early age, while others may commit some grave mistakes leaving them in a financially vulnerable situation.
It is smart to learn from people’s blunders without repeating them. Here are three errors you should avoid for achieving monetary freedom and stability:
- Failing to plan for your family’s financial future
When you are young, you often do not think about the uncertainty of life, and an unfortunate event results in your sudden absence. You are in good health condition and think that you have a long future ahead. However, the Coronavirus (COVID-19) pandemic has brought life’s uncertainty to the forefront.
If an untoward incident results in your untimely absence, your family members can end up in grave distress if you did not secure their financial well-being. Investing in term insurance is the easiest way to ensure their safety. A term plan is a pure life cover available at an affordable premium, allowing you to procure higher sum assured (SA).
If an unforeseen event occurs during the policy duration, the insurer pays the benefits to your nominees. This ensures they can meet their regular expenses and future financial goals, such as education, wedding, or retirement. They can also you the payout to repay any existing outstanding liabilities like a home loan, personal loan, or car loan.
- Making incorrect investment decisions
Often, when you start investing money, your primary objective is to make stellar returns. Moreover, you may not have the experience and the expertise to understand different financial products, their features, risks, and other factors and rely on recommendations from family and friends.
However, the most important basis of investing is to ensure that the chosen financial instruments meet your specific requirements. Consider various factors, such as your risk appetite, principal available, financial situation, life goals, and investment horizons. It is also recommended that you research different products and understand their workings before making an investment decision. Additionally, diversify your portfolio to reduce the risk of potential negative movements in one or more investments.
Insurance is a crucial component of your investment portfolio. Here, the simplest and most economical option is to get a term policy.
- Assuming higher debt liabilities
Financial institutions offer quick loans. This may seem attractive, especially when you are younger with limited responsibilities. Often, you may be eligible for several offers that tempt you to borrow money even when not required. Also, having credit cards and using them carelessly adds to the financial burden.
However, before you start availing different loans to buy a home or your dream car or take a holiday, bear in mind that it involves an interest component. Over the years, multiple loans can significantly increase the total interest payout, resulting in a debt trap.
Consider your income and expenses before you apply for multiple loans. Ensure you have the financial liquidity to make timely payments of Equated Monthly Installments (EMIs). Availing of financial assistance in the form of a loan can be helpful to make your aspirations come true. However, you need to be cautious. You can protect your family’s monetary security from any liability in case of an unforeseen event is by investing in an online term insurance policy. Your loved ones can use the money to repay any debts, ensuring they do not face any severe consequences due to non-payment.
Avoiding financial mistakes helps overcome many obstacles in life. With a term plan, you can ensure your family’s financial well-being even in your absence. Some insurers offer the return of premium facility, where you receive the entire amount paid over the policy tenure on maturity. However, such a plan comes at a costlier premium. So, buy a suitable online term insurance plan today and ensure you do not commit these mistakes.
