I see the typical 23-29 year old investors EVERYDAY. I see them earn money, spend money, save, grow, look for jobs, talk about money…..etc.
I can claim to have a good overview of what they do and I have a wish list of what I think they should do.
Here is my list of their big few financial mistakes:
1. Speculating instead of Investing: Investing in long term assets like equities can be as boring as watching paint dry! On the other hand the thrill of buying and selling (on your handphone dummy!) is far too exciting. So many of the kids have trading accounts, and their ‘relationship’ manager’s phone number on the speed dial. No, they may not make money buy they will argue (rationalize?) saying it is ‘only Rs. 43,000 or only Rs. 150,000 or….something like that! Most of them lose money in speculation. After burning about 3 lakhs, and still hurting one girl recently quit. Her CTC was that amount about 2 years ago. Ouch!
Sir I want to do a SIP – I will start next month is a statement I hear so often that I cannot believe it. Not understanding the importance of Time in the Compounding formula is a monumental error, but all kids do it. Those who have come to me are all fine kids and saying the right things, but just not getting to implement the gyan!
3. Not having adequate Medical and Life insurance for SELF and for parents. At some stage this can hurt.
4. Too much leverage: Either too much like Rs. 80 lakh leverage for a Rs. 1 crore debt or worse a Rs. 80 lakh debt when you have a job paying Rs. 20 lakh in a job which you may lose anytime! In a poor market where jobs are difficult to find, this will hurt. I know of a kid with a Rs. 1.3 crore debt, a Rs. 24 lakh job WITH the full knowledge that if she were to quit that job (or lose it) she will find it tough to get a Rs. 12 lakh job. Awesome self deceit.
5. Not LEARNING personal finance – start early, compounding, investing,….DAMMIT you need to learn, NOW. This leads to buying lots of endowment for insurance, credi cards, not reading at all, buying real estate just to get 80C benefits….
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