Beware of these common personal finance mistakes

[dropcap]T[/dropcap]here is no ‘one-size-fits-all’ financial plan/investment plan. That is why it is called as ‘personal’ finance. It is your finances. But investors still commit the same and commonly avoided personal finance mistakes.

Mixing life insurance with investment

This has to be listed as the biggest and the most common mistake that many people make. The role of investing is to grow wealth while the role of insurance is to protect it. Mixing the two will lead to lot of disappointment.

Buying a property at a young age through a home loan

In India, the decision to buy gold or to invest in a property is more to do with sentiments rather than a person’s actual requirements. You may have observed that as soon as a youngster gets married, the first financial decision he/she makes is to ‘own a home.’ This can be a demand from his/her family members (or) due to peer-pressure (or) ‘why pay rent when I can own’ syndrome. Considering the prevailing property market prices, most of us can buy a property through a home loan only. Once you acquire a home loan, around 30% to 40% of your net monthly income goes towards your home loan EMIs. This may put lot of strain on your finances.

Not maintaining an emergency fund

Even people who earn a five-figure salary sometimes can be found asking for financial help during unforeseen medical emergencies or unfortunate events. They earn well but they do not save. So, what do they do to fund these emergencies? They go and acquire personal loans or take loans on credit cards. This puts them in a viscious circle.

Not having sufficient health insurance coverage

When asking a salaried individual about his/her medical insurance plan, you get to hear this answer: “My employer provides health insurance cover.” With rising medical costs and unhealthy lifestyles, do you think that the coverage provided by your employer alone is sufficient?