Life is all about the right choices and decisions. If you make the wrong decisions, you might spend years regretting them. These are some wrong financial decisions which can set you back, several years.
1. Not making a budget
Making a budget helps you spend in a disciplined way. If you do not make a budget, you tend to splurge more money on unnecessary items. It is not just making a budget; you must make a budget and stick to it. Making a budget helps you spend on necessary things and your hard earned money will be used in the best possible way. If you have not yet started spending according to the budget start it right now. You might regret it later if you do not do so.
2. Paying the minimum balance on the credit card
You might be making a lot of purchases using your credit card. You pay almost all your expenses using the credit card. If you don't pay your credit card bills on time, you will be charged interest on the outstanding balance as well as you need to pay the late payment fees. To escape from late payment penalty, you will be forced to opt for minimum balance on credit card. This is the minimum amount you have to pay by the due date. If you keep on paying the minimum balance on your credit card, you will end up in the debt trap.
3. Not availing a health insurance plan
You must always avail a health insurance plan, when you are young. The advantage of availing a health insurance at a young age is, you will have to pay a lesser premium. Insurance companies will refuse to insure you in future if you are in poor health. Medical expenses are very high and if you do not have a health insurance plan, you will have to spend out of your savings.
4. Not having an emergency fund
Life is uncertain... anything can happen at any time. So you should prepare for an emergency, by having your emergency fund ready to meet any contingency. If you do not save for an emergency, you will be forced to borrow at a high-interest rate. If you do not repay this amount, you will fall into the debt trap.
5. Not having a retirement plan
You must start planning for retirement, from the very first day of your working life. The earlier you start planning for retirement, more is the money you will have at retirement. In your early 20's, you must invest at least 20% of your salary towards retirement. You should increase it to 30% when you reach your 30's. If you do not save for retirement, you will be forced to borrow from others.
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