Financial Cocktail Samosas: Bitesized Money Morsels For You, 02/03/2023

Money Mistakes Most of Us Make Over and Over

What do I do to avoid making mistakes I have made all my life so far? Let’s see:

The dynamics of future living including after retirement – It is very easy to support and finance oneself and family while earning, but keeping yourself well-funded when not in service is a different story altogether. Every rupee earned during the working days of your life should go towards the funding for the non-working days when, even if you get a good pension, so many pleasures of life will have to come from what you save now.

It’s well said in cricket that scoring early in the initial overs of the game keeps the future asking rate under control. Apply it to your money management – if you start to save early, the money required to save for retirement will be much less than the amount you will need to save if you start at a later age.

Improper or inadequate planning – Figuring out what you want to achieve a year from now and planning on how you want to achieve it financially makes you reach your goal as expected. Else regrets will come earlier than money!

Tax is money lost – Gains are great but gains with tax benefits are awesome! Investment gains will be reduced by the amount of your tax bracket and therefore need to be managed carefully. Investing in schemes that give you tax benefits or are tax-efficient are a great way to save money which would otherwise be lost. Look at ELSS schemes to get tax benefits and good returns as well.

Money management is complex, especially if that discipline is not inculcated since the very beginning. Inefficient money management can cost you much without your knowledge, and you may find your pocket empty sooner than expected. But an effective money management plan can lay down the path to an incredible success story.

(Contributed by Kritika Saini, Assistant Manager, Team Sukhoi, Hum Fauji Initiatives)

How to Resist the Urge to Overspend?

You begin each month with the best of intentions to stick to a budget, but gradually you find yourself making mindless purchases that are rationalized by the hazardous belief that ‘a little won’t hurt.’ Sometimes you might think that you are after all earning to spend on yourself, which is right to some extent, but the realization of overspending doesn’t come up until you face the actual financial challenges.

When you realise you’ve destroyed whatever cushion you had, you’re left scrambling for cash or, worse yet, using credit cards to make up for your poor decisions.

And frequent overspending may hinder the life of your dreams!

Which habits will get you the life of your dreams?

  • Your need is different from your ‘wants and desires’ – Something you ‘need’ is something you can’t live without. A ‘want’ is a luxury that you may want but don’t need to survive, such as designer apparel, a second home, or a SUV. Apply this ‘test’ when you’re in doubt!
  • Take the ‘impulse’ out of buys – An impulsive purchase can be made online with just one short click. Don’t buy something immediately even if it captures your attention. Create a list. After a week has passed and the item is still on your wish list (and in your price range), buy it. But, you might be shocked by how frequently you tell yourself, “I can surely do without it.”
  • Budget is your guardian angel – Even if you detest it, creating a budget is a necessary step in effective financial planning. A budget enables you to keep track of your spending, reduce wasteful expenses, and enhances your cash flow. A well-crafted budget helps you prioritise your spending and get you more out of the same money that you have.

Warren Buffett said, “if you buy things you don’t need, you soon will sell things you need”.

(Contributed by Gautam Arora, Associate Financial Planner, Team Sukhoi, Hum Fauji Initiatives)

Why Should you Plan your Retirement with your Partner?

Any partnership is not possible without a ‘partner’ and the partnership in marriage works only when both partners plan important life goals together.

Retirement Planning is one such important goal. If you are still not very sure why you must involve your spouse in your retirement planning decisions, it is time to relook at the reasons for it.

Assessment of your financial goals correctly. You might not be able to assess your financial goals by yourself as easily as you think because not everyone has a correct view of everything. There can be numerous details that you may overlook. Also, when managing money, you might not be fully aware of many aspects of your family’s long-term objectives, particularly those of your partner. You will learn a lot of things, that you did not know before if you talk to your partner and share your financial objectives.

Discuss to understand the risks involved. The level of risk you are ready to accept while making financial investments should also be discussed with your partner. Your ability to assume risk may be less than your combined ability to do so with your partner. You and your spouse might choose assets with higher return potential as a result of taking the proper risks, which the situation may demand.

Easy claiming of the corpus amount. If you don’t keep your spouse informed, you cannot expect him/her to claim your investments or the insurance payouts if something untoward were to happen to you. It is, therefore, necessary to have a shared knowledge of the investments made including insurance.

You must have faith in your partner to handle your investments. Making investment decisions without consulting your partner is pointless and is nothing more than an unconscious attempt to make sure that your family’s hard-earned money is not available fruitfully to your family after you.

(Contributed by Shaheen Akhtar, Relationship Manager, HNI Desk, Hum Fauji Initiatives)

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