Do people make serious financial mistakes?
Difficult question to answer, and it also depends on whom to ask. However the question should be framed slightly differently.
“Have you made any serious financial mistake? And if you are saying NO, do you understand what you are saying?’
My interaction with people of various ages shows the following mistakes:
1. Living beyond their means: No, no, they do not borrow to live, but they spend all their money without providing for all their goals. This means they are not serious about their goals (so it is a dream, not a goal?) or they think that some magic will happen later on!
2. Not tracking their expenses: they have no clue on what they are earning or what they are spending! ‘Only Rs. 4459 for a full gown sir’ – I wonder whether I understand the meaning of the word only in this context. Her net take home salary? Rs. 26,000. And I think she is over paid. No jokes. She also has a 24000 Rupee cell phone. Logic? ‘Subra Sir I am just his wife -HE is the primary provider’ . Women! Then do not seek equality everywhere?
3. Not investing, because they do not want to learn: ‘Sir my father asked me to buy the LIC policy and open a PPF, so all my money goes into these 2 assets only. He says ‘share markets are not for us middle class people’. She is a MBA, in finance, works in a bank. Sells mutual funds, ulips, …..well, well, nothing more to say.
4. The older generation refuses to accept that the biggest mistake in their life is not investing in equities. Many of them have exhausted their money, are dependent on their kids, but refuse to accept their mistakes. Many, many, of them are lucky to be getting a pension from the Govt of India. However their junior colleagues will not be so lucky. Sad, but if you are a govt. servant aged 45 or thereabouts, chances are the govt will default on pensions.
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