Arthur Miller once said that “Maybe all one can do is hope we end up with the right regrets.” For make no mistake about it, end up with regrets we all do. Roads not taken, careers not pursued, avenues not explored. Or simply the fact that the roads were taken that were not meant to be, careers pursued we wish we had not, or avenues explored we should have stayed away from.
The worst of these regrets can be the wrong financial decisions, however, because of how they impact your quality of life in later years. So let us look at 7 such decisions that you must be careful to avoid.
Withdrawing from your Provident Fund
Among the few good things about labour laws in India is our Provident Fund system. A relatively secure and compulsory investment for those of us in the organised sector, the Provident Fund, with its tax free returns and competitive interest rates is and should be one of the primary savings instruments for all of us. However, the rules also allow withdrawing from it in certain circumstances, and many people use this facility. But this is a hugely counterproductive act. Apart from the loss of interest accrued, the fact is most of us do not re-fill the PF, and when retirement finally comes around, you will realise that a withdrawal of Rs 5 lakhs when you were 35 leaves you with nearly Rs 40 lakhs less than your co-worker who never withdrew from his PF.
Paying the minimum on Credit Cards
We have written extensively on this website on the perils of not settling your credit card bills. Credit card companies in India can charge you upto 3.5% interest PER MONTH on outstanding dues – from the date they were incurred. Over a period of time this can lead to tiny dues running into hundreds ballooning into thousands and tens of thousands of rupees before you know it. So while Credit Cards are not intrinsically bad, ensure you do not spend more on them than you can easily repay in a month.
Delaying savings for retirement.
As we recently wrote on these pages, saving for retirement is one of the most critical things you need to do, and the right time to start saving for retirement is – as early as possible. Every year that you delay starting to save, you are taking away lakhs from your potential retirement kitty. Start early, save prudently is a mantra you must follow religiously.
Avoiding the equity markets
For better or worse, fixed-income investments have become low-yielding over time. As interest rates fall (and they have always been tied to inflation), it is increasingly difficult to accumulate wealth relying on FD’s and Bonds alone. At the same time, the real estate market is expensive to get started in and not yielding the best returns either, in recent times. As such, if you want to beat inflation, there is no alternative to prudent investment in the equity markets. Use the mutual fund route to enter the market and continue to monitor investments carefully and the odds favour you doing well out of it in the long run.
Falling for get-rich-quick schemes
Too many of us in India do not understand the importance of prudent investing. Attracted by impossible promises of returns and taken in by savvy salespeople, we invest in unknown companies and ‘get-rich-quick’ schemes, only to become a footnote in a newspaper article some years later talking about so many crores lost in a pyramid scheme. Staying away from any ‘scheme’ that promises returns significantly more than the market returns on the Nifty or Sensex is something you will never regret. Get rich quick schemes are always scams, and eventually, they unravel.
Not taking adequate insurance cover
Far too few of us understand the important of insurance. Both life and term insurance must be taken in time while we are young so that if, God forbid, the time comes when we have to use them, they do not severely dent all our plans. There is nothing you will regret so much as looking at a hospital bill, or at life without the earning member of a family, and realising you could have insured against it, but did not.
Overspending on children
This is the hardest piece of advice to give- and take. We all want the best for our children, but it is also important to realise that our own financial security is as important to our children’s future as the expensive schools and club memberships and private coaching. Unless you can really afford it without compromising on your savings, ask yourself whether these expenses are really necessarily. Similarly, spending massive amounts on children’s weddings, unless you have black money to burn, is rather wasteful. Give your children the best YOU can, rather than trying to measure up to an impossible standard.
Some things, after all, we can never undo, but at least if you must have regrets, let them not be about your financial situation.
