5 Financial Mistakes to Avoid: Don’ts of Building Wealth

Financial mistakes can happen even when you have a wealth plan. 

Money management can be complex. In the roller coaster of building wealth, many people get trapped in the biggest financial mistakes.

Don’t worry. We are only humans. Any mistake can be solved with the right knowledge and tools.

Let’s shed light on some of the common financial pitfalls and how to avoid them.

Get a cup of tea. We have some important decisions to make. 

Common Financial Mistakes And How to Avoid Them

1. Don’t Blindly Follow the Crowd

Doing what others are doing is human nature. You try out a new restaurant because your friends like it. Or you watch a Netflix show because an Instagram influencer recommended it.

Taking recommendations is fine as long as they are benefiting you. 

But you may wanna be careful with your money. 

Your money goals are different from someone else’s money goals. It could be tempting to invest in something your friend benefited from. But the chances of you gaining the same returns as your friend are very low.

Seek opinions from the experts instead of your friends or relatives who may not have your best interest at heart. 

Create a wealth goal for you and your family. Sit with a financial advisor to plan your investment portfolio

2. Stay Away From Get-Rich-Quick Schemes

Have you watched Hera Pheri? Then you must have seen the mess Akshay Kumar creates with ‘25 din me paisa double.’

If it was that easy, everyone would be rich. 

In the world of the internet, scammers are on the lookout at every corner. Even educated people fall for quick-rich schemes and end up losing money. And the reason is, these schemes know how to pitch the idea.

But don’t let them get to you. If a scheme promises unrealistic outcomes, it is probably shady.

Focus on building long-term wealth. Outline a retirement plan. Invest in mutual funds for a long tenure. Build a diverse portfolio by exploring various investment avenues. 

Be patient while your money brings more money.

3. Don’t Keep Your Money Lying in Savings Account

A lot of people don’t want to invest and lock in their money. The primary reason they keep the money in their savings account is- What if I need this money tomorrow for an emergency?

Fair enough. But the drawbacks are: 

  • You don’t earn enough returns. 
  • You may end up spending more just because you have money in your account.

If you are worried about long tenure, liquid funds, or short-duration debt funds allow quick redemption with minimal exit load. 

Create a separate emergency fund. Make your money work for you by investing it in instruments that better suit your risk appetite and money goals.

4. Trading is Not Investing

You’d think the quickest way to earn money is trading. But it is also the quickest way to lose money.

You will have to be accurate both while buying and selling to earn maximum returns. And the probability of winning won’t be in your favor all the time.  

Nobody can predict market movements accurately. Rather, create a long-term sustainable plan. Evaluate your expenses against your investments. Build a portfolio to support the kind of lifestyle you want to achieve. 

5. Fix Bad Spending Habits

What was the last thing you purchased? Was it value for money? 

Poor spending habits are one of the primary causes of losing wealth. You buy things just because you can. 

Do you really need that extra pair of branded shoes? Or that designer handbag that doesn’t even have enough space?

Separate your wants and needs. Purchase items that you are really going to use. You don’t want to live an extravagant lifestyle that can empty your pockets quicker than you imagine.

Instead, create SIP and set an auto-debit for the first week of the month. Put money in a PPF account or in mutual funds.

Corporate FDs are also a great way to lock your money and earn decent returns. 

Dos of Building Wealth

After discussing the don’t of building wealth, let’s quickly explore the Dos.

  1. Set a financial goal that includes your personal expenses, wedding, house, car, education, and retirement. 
  2. Start investing early. Benefit from the investment avenues that expand your wealth over the years.
  3. Understand how taxation works and invest in tax-saving instruments.
  4. Diversify your portfolio to balance the risk and returns.
  5. Hire a financial advisor to take the money management load off your shoulders. 

Final Words

Are you taking the right actions to build wealth for yourself and your family?

We hope the above Dos and Don’ts of wealth building will guide you in the right direction. Analyze your finances to find the money mistakes you are making with or without your knowledge.

Financial mistakes are easy to make and difficult to fix. Better to set things right before it’s too late. 

If you need any further assistance, our team would be delighted to help you. Write to us with your concerns, get your portfolio reviewed for free, and plan your next move. 

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