Financial Mistakes: why people make them?

As a person who has spent upwards of 3 decades in Money related activities, it is fairly obvious that I have seen many financial mistakes. If I ridiculed a person and said ‘Idiot this is not the way to handle money’ he would have felt bad and just disappeared. So financial mistakes have to be handled with care. On prodding a little, I realized that financial mistakes happen under the following conditions:

1. Person under stress: If a person is put under severe financial stress – loss of a beloved one, business losses, an accident that threatens his/ her business or life, illness especially which put a date to your life, anything can cause stress. Under such circumstances SMART, INTELLIGENT people can make remarkably wrong decisions. For example a person with cancer bought a life insurance policy on his daughter’s life (happily mis-sold by a family friend!!) thinking on HIS death, the policy will pay. The man was a PhD in Mechanical Engineering and an authority on his subject).

2. Cheated by a close relative who himself was cheated: This is the most common problem. When a fraud finance company tries to recruit agents it makes sure that such ‘agents’ have a reasonable sized ‘natural market’ – friends, family, friends of friends, colleagues,…at the end the so called ‘agent’ is also left penniless, but in the meanwhile his whole social circle has been sucked dry.

3. Stress caused by social circle: I know one girl (whose father was a corrupt government employee) who kept taunting her husband (a simpleton but well educated) about his inability to make money the way her father made money (LOL). This caused the husband to chase schemes which gave 30% p.m returns – with poor results!

4. Copying: If you are a cyclist and going a long distance it looks attractive to hold on to the chain of a truck – only till you realize that the truck is going in a different direction altogether.

5. Cheating spouse: When one spouse cheats the other spouse financially, the families end in a financial disaster.

6. Seeking a wrong person as an adviser: Most investors do not understand the value of good advice. Then they keep second guessing each of the ‘advisor’ they have. Or like the story of the father, son and donkey, they keep getting advice from all kinds of people. Their educational ego (I am from IIT, am a CA, from IIM, etc. and specialized in M&A for 12 years, so I know personal finance SHIT)

…..more to follow keep reading this blog 🙂

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6 Responses to “Financial Mistakes: why people make them?”

  1. IITians dont have ego!!!! they are very modest about it! (please replace it with ‘i am from ivy league’. but nice article.

  2. IIT ians do not have ego? Nice one, I refuse to bite. ‘Vidya garvam’ has been conquered by very very few people. It is a very important source of garvem – like yovana, lakshmi, shakti, yash, …is a long list, but Vidya is key.

  3. There is an old saying, if you meet an Ivy League grad, you know within 5 mins of conversation that he is from Harward or Princeton, but it takes an hour of conversing with an IITian to know about it.

    I do confess that the latest batches are not at all so modest and also not that deserving.

    And yes modesty and.’garva’ are different. one may hav garva and not express it.

  4. Ravinder Makhaik on July 12th, 2010 at 10:38 am

    We are mortals and live by ego.

    Even for Sidharth, a prince of Kapilvastu, it took years of wandering, begging and meditation to overcome ego and be enlightened a Buddha.

  5. “also not that deserving” – if this is not ego, wonder what is???

  6. @Param, why did you assume that i am an IIT veteran trying to downplay the latest batches. i am not IIT veteran. I am only 26.

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