There exists a lot of products or should we say things or habits that lead to wealth destruction. Let’s have a look at some of these practices which helps in only losing money over time.
1. CREDIT CARDS BILL DELAY
Paying the minimum amount due or delaying Credit Card payment can seriously make you loose your hard earned money. Credit Card companies provide interest free credit for upto 30 – 50 days depending on the card type.
Do you know the rate of interest charged after that or even after paying Minimum balance due which is just 5% of the total amount due.
2. DAY TRADING OF SHARES
Day trading is defined as the purchase and sale of a security within a single trading day without taking any deliveries with a purpose to gain from the daily volatility in the stock prices. Day Trading is the most common practice followed by new entrants into Equity investing. Day trading is not for everyone & involves significant risks. One actually can make thousands in a day and lose lakhs.
Always remember that fluctuations in share prices during the day does not truly represent the functioning of the company.
3. STAYING INVESTED IN FIXED DEPOSITS OVER LONG – TERM
Investors are obsessed with the safety over their investments and jump on any product giving guaranteed returns. Fixed deposits are good keeping in mind short term goals and offer guaranteed returns and peace of mind. Lot of investors generally start an FD for a tenure of 3/5 years and then keep renewing it and is actually losing money because of high inflation than fixed deposits. Not more than 10% of the portfolio should be in the FDs.
However , when it comes to our long term goals difference of 3-4% in interest rate can bring difference of crores over a period of 20 years.
4. USING PLASTIC MONEY INSTEAD OF REAL MONEY
These days we prefer using cards over cash for all the transactions because they are convenient and you don’t need to pay at that time of purchase , in the age of impulse buying and instant gratification , credit cards are widely used as free money.
If you keep paying on time , a credit card is a good option . The point here is real cash can avoid unnecessary spends or overspending. Tried and Tested.
5. SITTING ON CASH / IDLE MONEY
Ideally , 3 months of our monthly income should be with us in cash to take care of any uncertainties. Money in bank accounts will be fetching 3.5 – 4% and crores of money are lying idle for months and years. Shifting this money to Sweep – in fixed deposits or liquid mutual funds can fetch higher returns 6-7% with flexibility to withdraw whenever required.
It may take you a long time to create your wealth but to lose it ca be done in a matter of minutes. It is better to stay away practices that can erode your wealth and make good use of every product available in the right way. That way , we will not only save wealth but also be able to sleep peacefully.
About the author: Gurleen Kaur Tikku is a Financial Consultant and devotes her time to her company www.hareepatti.com. She has done her Bachelors in Finance and Investment Analysis(BFIA) from College of Business Studies(CBS, Delhi) and MBA from IMT, Ghaziabad. She can be Contacted at [email protected]