Normally we do mistakes and also learn from our mistakes. But sometimes it take a lot of time to realize our mistake due to our own ignorance or ego. At times we thinks that we know everything and because of this we didn't listen to correct advise sometimes.
Sometime we do mistakes due to laziness (i.e. purchase useless insurance plan or ULIP without understanding them), sometime we do mistake because we trust some person and got wrong advise (mostly happens in sales).
MISTAKE 1: Virtually no investment for initial 5 years of my career
I started working in Sep 2007 and trust me haven't done any real investment till Jun 2012. I used virtual word since I have purchased one endowment insurance policy thinking that I am doing investment.
If I could have started investing 5k per month (in PPF, Mutual Funds), I could have now approx 4 lacks. But the biggest loss is learning that I could have learnt from those years.
My advise :-
a) Start Investing now, if not started.
b) Never think that insurance or ULIPS are investment.
c) Learn why are you investing, where you are investing.
d) First invest than spend.
MISTAKE 2 : Not taken Term Insurance on time
I have taken endowment insurance policy in 2009 thinking that the cover it provide is sufficient. But after learning about Term Insurance I come to know it is totally waste of money to purchase endowment insurance policy or ULIP (both give almost no return's and mere life cover).
I had purchased endowment insurance policy to save the tax just because one of my colleague's advised me for the same. It's not his mistake, it's mine. As I said above learn why are you investing, where you are investing, I should have been learnt about this before purchasing it.
What I have learnt from it that "mixing insurance and investment is crime like drink and drive"
My advise:-
a) Never purchase any endowment insurance policy or ULIP just to save the tax.
b) Purchase Pure Term Insurance. It is cheap and provide enough life cover ( for 30-year-old non-smoking person 1 crore life cover cost only 8k).
b) Purchase Pure Term Insurance. It is cheap and provide enough life cover ( for 30-year-old non-smoking person 1 crore life cover cost only 8k).
MISTAKE 3: Didn't created emergency fund
For first 5 years I didn't create any emergency fund. This is also a big mistake and most of the people do. At the start of career we tend to in spending mode. Some people creates emergency fund and spend it without any emergency (i.e. down payment of CAR, vacation etc).
My advise:-
a) Create emergency fund ASAP.
b) Emergency fund should be your's 6 to 12 months expanse( including all EMIs) or take home salary.
c) Remember "Christmas is not an emergency". So don't touch your emergency fund if it is not a do or die situation.
I can understand these mistakes as I have made similar ones like buying endowment insurance policies, not investing into shares, no emergency fund as such etc. One good thing happened that my mother was after me with various forms of traditional savings immediately after started working. So I ended up saving a bit in PPF and Post recurring thanks to my mother.
ReplyDeleteI like this post. Wish I would have come across this 5 years ago so that I could have learned from others mistakes.
Now you can share your learning with others. The problem is people think that personal finance is very boring subject and thought that its a rocket science. By the way have you stared investing??
DeleteThere are two kind of investors. One who is interested to take risks and multiply their money more and the second who is interested in risk free investments and expect nominal returns. I belong to the category two. I invest 1L per annum at PPF. Interest earned in PPF is tax free and max limit is 1L. I urge every one should use this and it is a great investment in long term. You get around 8.75% tax free returns. I suggest NSC in post office as the next best investment with similar returns. 100 Rs becomes 236 Rs in 10 years and the maturity amount is tax free. If you invenst 10000 Rs every month for 10 years, it will return 23600 every month after 10 years. Reinvest that for further period of 10 years which will help you as pension when you retire. This is better than investing in real estates which has a lot of risks.
ReplyDeleteGood one. Its batter to invest like you are doing than not investing. Thanks for your view.
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