What is the story about?
5 financial mistakes: You are working hard, earning a steady income, and managing your expenses, but somehow, by the end of the month, it feels like your money
just disappears. The truth is, you are not necessarily earning too little. Often, it’s the small, silent mistakes we make with money that quietly drain our finances. Today, we are going to uncover some of the most common money mistakes people make and how to avoid them so you can take control of your financial future.
5 financial mistakes that may make you poor
1. Treating insurance as an investment or mixing the two
Many people buy insurance plans that promise both protection and returns, like endowment or whole-life plans. These are costly and offer low returns, such as a Rs 1 crore cover may cost Rs 60,000/year with only 5-6% returns. In comparison, a Rs 1,000/year term plan may provide pure protection, and investing the rest in mutual funds can yield 10-12% long-term. Rule: Keep insurance and investment separate for better financial growth.
2. Paying only minimum due on your credit card
Paying only the minimum due is a silent financial trap. For example, a Rs 50,000 bill with a Rs 2,500 minimum looks manageable, but the remaining balance accumulates high interest, for example, 3-4% monthly (36-48% annually). Over two years, debt can double, and you may pay tens of thousands in interest. Credit card companies benefit from this. To avoid the trap, always pay the full bill, or use debit/cash if full payment isn’t possible.
3. Investing without proper research
You might spend hours researching a phone, but only a few minutes on a stock your friend suggests. If you can’t explain in one sentence what the company does, how it earns money, and the risks involved, don’t invest. Investing without understanding is wasting your money and time purely, and in the long run, the “house” always wins. It means the longer you invest recklessly, the more likely it is that you will lose. You may win in the short term, but over time, the 'house', the establishment or operator, always wins.
4. Lifestyle inflation with salary hikes
When your salary rises 20% but your expenses grow 40% on clothes, bigger apartments, gadgets, and weekend getaways, you aren’t getting richer, just spending more. True wealth comes from the gap between income and expenses. Always save at least 50% of any salary increase before upgrading your lifestyle.
5. Concentration risk: Putting all your eggs in one basket
Putting everything in one sector or asset makes your portfolio fragile; if it crashes, your money suffers. Spread investments across asset classes like equity, debt, gold, real estate, and multiple sectors such as IT, banking, healthcare, and FMCG. Diversification acts as a financial seatbelt, protecting your wealth when market shocks occur.
Read more: SBI Amrit Vrishti 444-day FD: Interest rates cut by 15 bps; check returns on Rs 5 lakh, Rs 10 lakh investment
