Blog > 10 Bad Financial Habits to Conquer this Dussehra
Dussehra, just like many other Indian festivals, is a celebration of good over evil. We can't help but admire Dussehra celebrations – the effigies of Ravana are burnt with alacrity, and everyone is in the streets having a great time. But this period is also a time to promise yourself – you'll defend your financial position against all odds and be the strongest you can possibly be when it comes to your financial well-being.
This is the moment you need to promise yourself that you'll conquer your financial weaknesses and envision a positive financial future. While many of us are aware of the financial evils we need to conquer, such as lavish spending and poor saving habits, there are also several hidden demons lurking around us. You might not be aware of these financial vices lurking in your day-to-day financial decisions. So, let’s get rid of the bad financial habits that are holding you back from your financial success.
If you're spending more than you earn; you're overspending. The first step to getting out of debt is to stop overspending and start saving money. And the best way to do that is with a budget.
A budget is a plan for how you spend your money every month. It's like a map that shows you where your money goes so you can decide where it should go instead.
To make sure you spend less than you earn and start saving money, use this simple formula:
Income - Expenses = Savings
When your total expenses are less than what you earn, then there will be money left over in your savings account.
When it comes to financial planning, Indians have a long way to go. Not having a financial plan is one of the evilest or bad financial habits. Studies suggest that 81% of Indian parents don't even know the cost of higher education in the future; 71 percent of parents in India are willing to go into debt to fund their child's higher education, and 3.44 percent is the dismal extent of insurance penetration in India.
The problem is that having no financial plan is like trying to drive your car without knowing where you're going. You might get lucky and arrive at your destination, but it's more likely that you'll end up somewhere else entirely — perhaps not even on the same continent. It's hard to reach your goals without one. You may want to buy a new home or car in the next few years or save money for retirement or college tuition for your kids. But without an overall plan, how do you know how much money to put aside each month? Without an answer, it's easy to overspend now without saving enough later — or vice versa.
The one mistake that can ruin your financial future is not having an investment plan. You need to start investing if you want the most from your savings. It's not hard to find investment opportunities; there are thousands of mutual funds, index funds, and exchange-traded funds out there. Investment doesn't have to be complicated. It doesn't matter whether you're a stock market expert or have never invested a single penny—you can still get the most out of the money you have and make sound investment decisions. All it takes is a little bit of knowledge about what you're doing and a willingness to learn.
If you work with an advisor, they can help with things like asset allocation and timing the market—both essential strategies when deciding where to put your money. Once you have a plan, it's easy to stick to it; otherwise, it's easy to make excuses and fail to use your money as best as possible.
Filing tax returns is an essential part of your overall financial planning. If you have been careless about your tax filing in the past and never bothered to file for any tax deductions, you might be missing out on a lot of money. As you look back at your past tax returns, you might be shocked to see how much extra cash could have been added to your bank account.
Thus, we can say that tax planning is one of the most important aspects of personal financial management, but many people don't view it as a top priority. Tax planning can be an enormous help in avoiding some of the worst financial pitfalls. Tax planning can help you reduce your income taxes and ensure that you pay only what you owe. If you're using a professional to do your taxes, they'll be able to find deductions and account for elements such as capital losses that could lower your taxable income below what you expected.
Financial literacy is an important topic that needs our utmost attention. For many people, it is a black box; they know there are certain concepts but lack the understanding of how to apply them. For example, someone might know about inflation, but not fully understand how this works in relation to their own financial situation. In addition, there are often gaps in understanding between the different aspects of finance. The three main parts to understanding financial literacy include:
1) The personal finance basics
2) The investing basics
3) The insurance basics
Currently, there are huge gaps in knowledge between these three topics and to bridge these gaps you need to keep learning from financial advisors, websites, resources, etc.
I have been known to say that for most people, living paycheck to paycheck is not a cause of a budget breakdown—it's a symptom. The real problem is not knowing how long you could live on your savings if you had to.
In short, don't wait until you're already in trouble to start budgeting for emergencies. If something were to happen today, could you cover all your expenses for at least three months? Most people can't. So, what do they do when they lose their job or get hit with a big-ticket expense? They go into debt.
Make sure that you deposit enough to make saving easy. The more consistent you are with your deposits, the more likely you are to continue successfully saving. When choosing where to save money, make sure that it's easily accessible. You don't want to put your emergency fund in a place where it takes a long time to transfer funds so that you can access them if needed. If interest rates are low where your funds are being held, consider transferring them somewhere else. Saving is work that takes effort and focus, so make sure that you're putting your hard-earned money toward the best account possible.
Taking a loan without planning is a blunder. Borrowing without a solid plan can cause you to fall into debt. Before taking any loan, you must think in advance with the following things in mind:
- How can I repay the loan?
- What will the money be used for?
- Can I afford the loan? (i.e., is there enough cash flow to pay for it?)
Answering the above-mentioned questions confidently means you are ready to take a loan. Click here to apply for a loan. Apart from that, consider your options, and review the interest rates, the repayment tenure, and other terms and conditions attached to your loan.
Credit cards are one of the most convenient and flexible ways to pay for goods and services. With a credit card, you can buy anything from a cup of coffee to an airplane ticket to a new car. However, many people don’t use their credit cards wisely and that is a very bad financial habit. There are several common mistakes people make when using credit cards that you should avoid.
If you are not careful about the purchases you make with your credit cards, it is possible for the debt to become unmanageable and for your financial situation to worsen. When people use their credit cards to buy things they do not need, they often spend more than they intended to spend. These extra expenses will become a debt that must be repaid, which can present problems if it is not paid off immediately or if the interest rate is high. Therefore, it is advised to make prudent use of your credit cards.
Delays in EMIs or credit card payments can be a serious concern for you. Delay in payment of EMIs or credit card dues can lead to the following:
-Increase in the interest rate and late fees
-Low CIBIL Score
-Loss of collateral or property
-Repossession of property
-Legal action by lenders/banks
Therefore, you need to make timely repayments of your bills or EMIs. Making timely payments on your credit cards or EMIs is a sure-shot way of keeping your credit score high and reducing the interest burden you have to bear for the loan you have taken.
A CIBIL report helps banks, credit card companies, and other financial institutions assess your creditworthiness. The higher your CIBIL score, the better it is for you and the easier it will be for you to get a loan. In order to have a good CIBIL score, you need to ensure that your CIBIL report is correct. A wrong entry in your CIBIL report can cause you a lot of trouble in the future. This can impact your professional life as well as your personal life. Therefore, it is important that you keep a tab on your CIBIL Report.
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Financial problems are mostly from our habits, deceptions, and lack of discipline. We spend money on unnecessary things and avoid saving some money for rainy days or future needs. During Dussehra get inspired by our article to get rid of these bad financial habits and enjoy your life with a lot of fun.
Follow the above-mentioned tips and begin your Tarakki Ki Tayari with IndiaLends.
Happy Dussehra! May health, wealth, and prosperity surround you always!