Earning money is easy, managing it is not. When there is a continuous inflow of income, forming the right habits in the early days becomes important. But if you do have any bad habits, get rid of them now. Bad habits are easier to abandon today than tomorrow. So, the sooner you get rid of them, the better it is for you and your money. The festival of Holi marks the celebration of victory of good over evil. Let this be an occasion for you to burn your bad money habits.
1. Uncontrolled spending
How many times have you visited a mall for buying just a pair of jeans and returned with a bunch of bags? Does a flat 50% off sale lure you into buying more stuff than you need? Maintaining financial health requires a disciplined approach. Impulsive buying is not healthy for your money. You need to be more rational than emotional and impulsive in your spending decisions. In words of Warren Buffet – If you buy things you do not need, soon you will have to sell things you need. Having a monthly budget, therefore, can be the first step towards efficient money management.
The right time to invest was yesterday. Whichever investment vehicle you choose, make sure you act on it soon. Whether it is selecting a mutual fund or finding a tax-saving option, research, analyse, shortlist and decide fast and get going. You are likely to benefit more through compounding by investing in mutual funds as you also earn interest on interest. If you are looking for a tax-saver, Equity Linked Savings Scheme (ELSS) is a type of mutual fund which gives tax benefit under Section 80C of the Income Tax Act.
3. No investment goals
Not having investment goals is like shooting in the dark. Having pre-determined goals gives your investment plan a direction. It helps you choose the right investment option. For instance, if you want to save for retirement, which is 30 years from now, you can start SIP in open-ended mutual fund scheme. When you have goals, like you need Rs. 40 lakhs in next 8 years, it is easier for you to work backwards and find a suitable investment vehicle.
4. Being impatient about investments
Rome was not built in a day. If you want to earn good returns on your investments, stop tracking their progress every day, unless you are trading. Once you have invested, trust your decision. Investment vehicles like mutual fund and equity because they are known to give handsome returns over the long-term. Such investments may be volatile over a short period of time but this is when you shouldn’t panic and pull out your money. Give your investment time to breathe, especially in case of equity mutual funds. Past data have shown they usually perform well in the long run.
5. Improper debt repayment
Remember to pay your credit card bills and loan EMIs before the due date. Missing it is a strict no-no. It can severely affect your credit score. Missed or delayed payments reduces your credit worthiness making you less desirable for lenders. Additionally, you end up paying more money than you signed up for because of the penalty levied on non-repayment / default. Try to manage your debts wisely. Avoid taking credit if you already have debt. Taking new loan for repaying previous loan is not a good idea, unless the interest outgo is less.
To sum up
Ensure that you are not spending more than you earn. Also, don’t let your money sit idle, when you can invest and earn. Well, money might not be the source to happiness. But having a clear money management policy can surely let you live stress free and be a ladder to becoming wealthy. As mentioned earlier, the right time to invest was yesterday. So, why procrastinate any longer. Click [here] to find out various investment options offered by Franklin Templeton.