Don’t Buy Retirement Home at the Wrong Time?
Buying a home for yourself is almost always an emotional decision. But it also is one of the biggest purchases we do in our lives. Do consider the following relevant points if you decide to buy a house very early in your career to prevent making an expensive financial choice:-
1) Your tastes will change over time: Have you maintained the same lifestyle throughout the past five, ten, or fifteen years and your priorities and choices have remained the same? Not likely. If you buy your home long time before retiring, you might need to make significant changes to it to keep it up to date as per your changed choices, do substantial repairs or improvements to it, have a 20-30-40-year-old building to stay with attendant problems or worse still, and a very common phenomenon, you might decide not to stay there after having endured years of repairs, property tax, tenant idiosyncrasies and maintenance charges.
2) Fear of missing out (FOMO): It occurs when either you get persuaded that the property is a ‘fantastic financial deal’ you’re missing out on or fear that values will soar, pricing you out of the market when you retire. Either way, fear isn’t a good or logical reason to buy a house and endure a life-time of misery due to wrong choice.
3) Talk to your significant other: It is always important to discuss it with your loved ones with whom you intend spending your retirement life. It would help make things better.
4) Pay attention to accessibility: What if you bought a vacation-retirement home in a sleepy beach community or mountains with harsh winters? You may face lack of quality medical care or other necessary mobility services.
5) Owning two homes can cause financial strain: If you are planning to buy a home after retirement while having a house already, it could turn into financial stress and make you miss out on important goals in life which may get starved for funds. Even if you rent out the property, it would diminish your cash flows since rental returns are very poor in India – significantly lesser than the interest you will pay on your home loan or returns you will get on your own money in other financial instruments.
Of course, buying a retirement home early also has the advantage of having an easier time to pay for the loans through EMIs while being employed. But then the Advantages Vs Disadvantages have to be thought through.
There’s no one-size-fits-all approach, but for most people, it would be advantageous to wait until you’re much closer to retirement to buy own home as per your choice of location, style, budget and proximity to people you wish to spend your golden retirement with.
(Contributed by Priya Goel, Financial Planner, Team Sukhoi, Hum Fauji Initiatives)
Recency Bias Could Be Seriously Affecting Your Financial Journey!
Just like typical cricket fans, who judge players based on their performance in the recent series, investors too fall victim to ‘Recency Bias’ by emphasizing more on recent performance than long-term one.
Recency Bias is the tendency to assume that something will occur again just because it recently occurred. We often give high importance to recent events and take decisions related to our finances based on them. It affects almost each and every investor.
Take a recent example. Post-Covid period, IT sector had a golden run, and many people believed that it would continue forever to provide them the same returns in short periods and started investing in it. The reality turned out to be totally opposite to it because warning signs and macro-economic situation were ignored.
How to avoid recency bias:-
- Understand market psychology: The equity market tends to be volatile in the short run. Prices go up and prices fall all the time. Eventually, markets bounce back from their lows, revert to the mean and reach peaks typically higher than the previous one.
- Focus on your financial goals: Define your financial goals clearly and invest accordingly. All that you have to do there is to stick to your financial plan. It will keep you disciplined and prevent you from being affected by recent events, FOMO, in the markets.
- Consult a financial advisor: Before making an impulsive financial decision based on a recent event, it would be helpful to seek the advice of a financial advisor.
It is near impossible to totally eradicate recency bias. However, there is no excuse for not making every possible effort to get rid of it. Keep your focus on your long-term financial journey and don’t let the short-term happenings distract you.
(Contributed by Yogesh Gola, Associate Financial Planner, Team Vikrant, Hum Fauji Initiatives)
SIM Swap Fraud – how not to fall prey to it?
Nowadays everything is accessible with a single phone click. But this boon comes with a bane and one of them is ‘SIM Swap Fraud’, which is also referred to as SIM Splitting or SIM Hijacking.
What is SIM Swap Fraud?
A more sophisticated form of cyber crime, it entails the attacker first disabling your SIM card by phoning your telecom provider and getting a second SIM to easily access OTPs and SMS’ to perform financial activities posing as You.
How does it happen?
Step 1- Fraudster steals your important data: The fraudster gets personal information like your PAN card, Bank Account number, and Net banking password which are essential for an online transaction. These things can be acquired using Email/Phone/SMS fraud or by hacking your personal devices, sometimes from airports and other public places where you may use open public networks, Cyber Cafes or photocopier shops.
Step 2- Placing a request for SIM Swap with your SIM Company: Here, the scammer contacts your SIM provider to seek a SIM swap while presenting all necessary documents in your name. To effect this, someone may phone you, pretending to be a SIM company representative and say that an upgrade is now taking place and your SIM card won’t be active for a while.
Step 3- Implementing the transaction: Once the request is processed, the fraudster has all the login details and a new SIM Card which is linked to your net banking. The final step is to add a beneficiary and complete the transaction.
Step 4- The Fraud happens: Now, the OTP comes to the new phone number, the transaction gets completed, and that too in a non-traceable way.
How to prevent it?
- If your network is lost for more than 20-30 minutes, be alert and enquire from your mobile operator.
- If you get an SMS regarding a SIM Swap request received, alert your bank immediately and change your Net banking Password.
- Never share the 20 digits mentioned on the back of your SIM card and periodically access your account statement as well.