How To Prevent Psychology Traps From Losing You Money In Investing
When you're a twentysomething, long-term financial planning is often not a high priority. Even a ten-year delay in saving can have significant repercussions for one's retirement saving, with every further year's delay making it increasingly difficult to close the funding gap. Start with 10% or even 5%—just get into the savings habit. Today, we'll be looking at some money mistakes people (especially those who have just left school and started out in their careers) make.
Without setting aside money for an emergency fund, you may find yourself in debt. Soon enough you reach your 30s, and your priorities may shift to saving for a house or paying for childcare — still not an easy time to save for retirement. Maximize retirement savings.
The danger is that when your income drops, it is very hard to drop the lifestyle expenses. If you haven't got an emergency savings stash, chances are you will wind up charging most or all of that to a credit card. Now is the time to make sure they respect money and the hard work required to get it. Incentivise them to save for something that care about by chipping in or matching their savings.
Some of these include the EPF, traps PPF, NPS, 5-year tax-saving fixed deposits , ELSS, Ulips, life insurance, etc. It's also a quick ticket to losing money and accumulating debt, at exactly the time in your life when you should be building your wealth Make sure you have a household budget, keep track of your expenses and live within your means.
If taxes are eating up a considerable portion of your income, it is time that you start knowing the facts about retirement planning and start focusing on them as soon as possible. One way to do this is to set up automatic transfers from your bank account to a savings account or investment account.
Here is a small illustration: At 25, if you start saving Rs 5,000 per month on which you earn a moderate 8.7% return, you'll have Rs 1.37 crore at 60. If you delay the investment by 5 years and start at 30, your corpus will reduce by Rs 51 lakh and you'll have Rs 86.6 lakh when you retire.