Ignore these 5 Money Mistakes - Part 1
Seeing your funds increase must feel nice, right? It is equally terrifying to see their value decline, largely as a result of insignificant errors, though. If you comprehend a few fundamental money management ideas, the most of these errors can be readily avoided. Both a financial degree and extensive research are not necessary for this. It might not be easy to get money, but it can be easy to protect and even grow it, so let's #BreakFree from frequent blunders we make with our finances on Independence Day!
1.Free yourself from unsolicited advice.
‘I am telling you, buddy, buy this stock. It will skyrocket soon.’
‘No, no, invest in FD. It is the best investment!.’
‘No, buddy, real estate is the best. Believe me, invest with me.’
Let's face it, we have all listened to such well-meaning counsel and even obtained a few "tips" online. Without wanting to rave, following this advise could cost you nothing to a lot, depending on the seriousness of your financial errors.
Keep in mind that your money is on the line. Therefore, before investing your money, take a moment to consider whether it is appropriate to do so and base all of your decisions on the advice of the aforementioned person or outlet. You will be on the verge of inner peace if you can control your impulses as much as possible. This maxim also relates to money.
We contend that it is past time to stop receiving such unwanted and deceptive material. Keep in mind that your circumstances and objectives are unique from others'. Your investments should be based on a variety of factors, including your financial objectives, present circumstances, level of risk tolerance, and more. Even though it might be the ideal investment for someone else, it might not be the same for you.
Here are some ways to free yourself from misleading advice:
- A solid financial plan: It guides you on where to invest and why. When you have an investment plan in hand, you become aware of what is right for you and what you definitely need to ignore.
- Shut the noise: It would help if you shut the noise from everywhere else. Don’t ignore your financial advisor. With their guidance, you can shut down and ignore those who try to sell you their advice for free.
Thus, freedom from misleading information = a solid, actionable financial plan.
2.Free yourself from ignorance.
If you toss a coin, you have a 50% chance of predicting the correct outcome. But there is no absolute correct path in finance. To each their own is the philosophy here! Also, ignorance to your finances can prove to be a hefty mistake down the line. The goal is to understand your current situation, lay down your assets and liabilities and plan for sustainable growth in your asset column while minimising the liabilities section.
Hence, it’s time you save yourself from the trap of ignorance and break free from incomplete knowledge.
3.Free yourself from excessive spending.
‘Oh, look at that! It looks so good, and I really want it.’
Oops, wait!!
Right there is a trap. Have you ever bought something because you wanted it but didn't need it? If so, your savings are being depleted by cravings that have captured you. "Desire is a contract you create with yourself to be unhappy until you achieve what you desire," explains Naval Ravikant. However, since having fun is an essential aspect of life, spending is OK as long as you set reasonable limitations. The issue is overspending, which might compel you to use credit and keep you trapped in a debt cycle.
It's time to let go of those desires and restrict your freedom, whether you like it or not. Here are some methods to assist you in keeping track of your spending and savings.
- Separate spending account: Plan your purchases for the month and stick to them. Keep a separate account for spending. Transfer only what you need for necessities from your earning account to your spending account. Limit your spending to that. Don’t keep extra money in your spending account because supply creates demand. If you have limited money in your spending account, you won’t be able to overspend.
- Reward yourself: Research suggests that using rewards can help increase the probability of behaviour (in this case, limited spending or saving), especially when there is a direct correlation between the event (rewards) and the behaviour. You can start by setting a reward for yourself. You can set a goal of ‘saving Rs. 8,000 and then buying your favourite shoes that are worth Rs. 2,000 ‘. This way, even after spending on your desires, you have a decent amount of money in your pocket.
- Wait for some time: If you are tempted to buy something, do not buy it right away. You can also try sleeping on your urge to buy something. Meaning, wait for a few days before actually buying. If you still constantly think about buying it, then you might as well buy it. Otherwise, move on. You are free from that desire. This way of dealing with your desire will help you in monitoring your habit of spending.
Remember, the value of waiting here is much more than regretting later.
4.Free yourself from FOMO and FOLO.
Did you ever buy or do something only because you have a fear of missing out (FOMO)? This can crop up while investing as well. Let’s suppose a stock is trending. Since everyone, including news channels, trading forums, and your friends, is talking about it, you may be struck by FOMO and invest in it.
How to get over FOMO? Don’t act impulsively. Before investing in any financial instrument, consider your options, research, and go ahead only if it works for you and is aligned with your goals.
But, how will you save yourself from FOLO – Fear of Losing Out? Like FOMO, FOLO is also driven by fear. The risk of losing money is in the heart of every investor. There is a behavioural bias linked to FOLO called loss aversion. It suggests that we feel pain (loss) twice as much as we feel joy. Hence, you might not invest even if your research suggests it. On the contrary, the loss aversion bias may make you believe that today’s losers may soon outperform today’s winners. So, if you invest driven by this behaviour, it may lead to losses. How do you get over it?
Start by determining your risk appetite and financial plan to find the best-suited investment instruments. It is always worthwhile to consult a financial advisor for guidance. Further, you can invest in learning risk management. It will go a long way.
Hence, freedom from FOMO and FOLO = Proper research, risk management, and a solid financial plan.
5.Free yourself from infobesity.
Information overload (infobesity) may leave you hanging with your investment decisions. It is a fact that in finance, data is the fuel for decision-making. However, if you collect and consume enormous data from every source, you might end up with an information overdose. It can lead to confusion, and you might end up taking the wrong decision. Hence, let’s break free from information overdose.
One way to get out of it is to devote time to research. Make sure your sources are genuine. Do not pay any heed to rumours. Second, learn to use the information you have for your benefit. You can take professional help for this. Being patient will go a long way. Sometimes, the information overdose may make you impatient, which can lead to wrong decisions.
Further, learn about the investments you want to make. Proper learning with research and a great tool can help you sort your investment decisions and make timely judgements.
Hence, freedom from infobesity = Adequate research, patience, a financial plan, and a great tool.
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