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    Kill these 10 financial evils this festive season

    Synopsis

    These 10 financial habits are eroding your wealth. Here's how you can get rid of them.

    dusheraGetty Images
    These 10 financial habits are eroding your wealth. Get rid of them this Dussehra.

    • Profligacy
    Wasteful spending is a big problem, especially for millennials. The proliferation of online shopping has fuelled the malaise. Young people want to buy the latest gadgets and new apparel, unmindful of the impact these expenses can have on their finances.

    How to slay it
    Spending is not a sin if done within limits. To make sure you don’t overspend, set a budget and stick to it. Budgeting apps help by sending out alerts if you spend beyond a limit on any head.

    • Laziness
    Procrastination may seem harmless, but delaying your investments can cost you a lot. If your money idles in a savings bank account, it loses value. In five years, even a modest 6% inflation will reduce the value of Rs 1 lakh to less than Rs 74,000.

    How to slay it
    Open a recurring deposit in your bank or start SIPs in mutual funds through a financial app. Automating your savings will ensure that the amount gets invested every month.

    • Greed
    Everyone wants to earn high returns, but not everyone understands the risks involved. Investing in stocks is risky but can be very rewarding if done carefully and in a disciplined manner. But dabbling in futures and options is usually ruinous for the small investor.

    How to slay it
    Small investors should buy equities through mutual funds, Ulips and pension products. One can invest in direct stocks if one has done enough research. But one should never venture into futures and options.

    • Envy
    It’s easy to get enamoured when friends and acquaintances talk about their investments and the high returns they earned. Following in their footsteps may not always deliver the desired results. Past performance of an investment option is not an assurance of future returns.

    How to slay it
    Investments should be customised to the needs and risk appetite of an individual. What worked for someone in a certain situation may not work for everyone.

    • Fear
    Just as greed makes investors overlook the risks involved, fear makes people blind to the opportunities. Fear of losing money makes investors shun the potential of equities and pushes them to buy low-yield instruments that give poor but assured returns.

    How to slay it
    Establish your asset allocation and stick to it. Research has shown that periodic rebalancing of the portfolio can yield better returns than trying to fi nd the best performing investment.

    • Pride
    Investors hold on to poor investments and losing stocks because they fear that selling an investmnt at a loss would make them appear stupid. They somehow want to prove that they were right in picking that investment and are willing to hold it till it recoups its losses.

    How to slay it
    It is silly to let your ego define your financial choices. Never fall in love with your investments. If a stock has no future, dump it and cut your losses. If you continue holding it, the losses will only grow bigger.

    • Impatience
    Impatient investors are rarely successful. Whether you are investing in fixed income options or equity markets, impatience prevents you from earning high returns. Early withdrawals from the Provident Fund stops the power of compounding. Selling off a stock or equity fund too soon will help book profits but prevent you from the long-term advantage.

    How to slay it
    Don't book profits in a hurry when your investments move up. Assess the real reasons for selling before you redeem your funds.

    • Forgetfulness
    The implications of missing financial deadlines range from minor charges of Rs 100-200 to serious penalties running into thousands of rupees. If you miss an EMI or a credit card bill, you will be slapped with late payment charges. But if you miss the tax fi ling deadline or an insurance premium, you could be in serious trouble.

    How to slay it
    Just as automating SIPs and recurring deposits ensures that you don’t miss investment targets, putting your bills on autopayment mode means you don’t miss payment deadlines. Put alerts for important dates like insurance premiums and other deadlines.

    • Lust
    Fraudsters cheat people by promising them a huge share in their inheritance or bargain offers on their credit cards. The temptation to make easy money can make even level-headed people part with money or credit card details.

    How to slay it
    Never believe fraudsters who promise you money for doing nothing. There are no free lunches in this world and if someone wants to give you a share of his fortune, he is probably a con artist.

    • Blind faith
    Last but not the least is the tendency to blindly believe whatever a salesperson tells you. Relationship managers from banks are the worst offenders when it comes to misselling. They find easy targets in customers who don’t ask too many questions and readily sign on the dotted line.

    How to slay it
    You spend hours researching a smartphone. Spend the same amount of time when you buy a financial product. Compare its features, read up the terms and assess its utility in your portfolio.

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    (Your legal guide on estate planning, inheritance, will and more.)

    Download The Economic Times News App to get Daily Market Updates & Live Business News.

    ...more
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