Making traps or mistakes can be counted as a virtue only if you can learn from them. In life, we make several financial blunders and most of them due to lack of financial literacy. We can sail through some of them. But in many cases, we can’t find the power to recover from a massive loss. Let’s look at some of financial mistakes we often commit and also the ways to stride them through.

1. Not saving enough for retirement:

When we start our career or even when we are in our early thirties, we often look at retirement as a far-fetched idea. And planning for it can start later. The reminders strike us only as we reach our mid or late thirties. Even if it’s not too late but task becomes much of a burden. Inflation and increased life expectancy are the two reasons for which we should be more wary of retirement savings than before.  On an average, a household with an average expenditure of around Rs 500000 would be needing Rs 5 crore as a retirement corpus in 25 years. For this we need to save around Rs 25000 every month solely for the purpose. This is definitely not an easy task to follow. 

Way out: We should plan for retirement savings from the day we start earning. Keep 10 percent of your earnings as your retirement savings, add another 10 percent to it every year and never touch the money till you actually retire. That’s the simple formula.

2. Not building a contingency fund:

Contingency fund is money reserved to cover any unforeseen future expenses. Often we fail to build such a fund and tend to meet unforeseen expenses from the fund meant for other expenses or savings.

Way out: Building a contingency fund is not a tough business. It’s a matter of few months. Save up a little portion of your earning every month (whatever you feel is feasible) till you feel it is sufficient to give you a buffer. Financial experts say a contingency fund should cover our three to six months of expenses at least. 

3. Overspending and not saving enough: 

Millennials with a disposable income have a tendency to overspend and saving less than necessary. From Rs 2000 bill at a restaurant to Rs one lakh for mobile phones,  most of us spend more than our ability. 

Way Out: life is about seeking comfort and pleasure and we should allot some bit of money for such purposes.  But it is equally important that we save similarly for future purposes to make sure that we run out of money at our old age when certain comforts become necessary.

4. Not learning with times:

This is biggest mistake we make not only in terms of our finances but with life in general. Financially we are tuned to believe that putting money in fixed products is the only way to keep money safe and growing.  The formula was right when they provided returns. But our ideas hardly changed since then. At a time when fixed assets fail to beat inflation, such old adage does not hold true.

Way out: It is always necessary to put some of our saving in fixed assets but it is equally necessary that we allocate certain portion in equities. If we plan long term, equities provide us a much better return.  Also do not churn everything as a per trend, even that is a risky move. 

5. Not hiring a financial advisor:

There is reason they are paid their price and there is a reason why we can trust them with our money.  Few people who are savvy with finances can handle their own money but that is not the case with everyone.

Way Out: Hire a financial advisor.