Today let's talk about 5 Money Mistakes which I have done in my 20s. And after knowing it, it might help you to avoid these mistakes.
Not Started Investing Early in Stock Market
Investing in the stock market is a wonderful tool for wealth creation and completing your financial goals. And if we start investing earlly, it will surely improve the financial future. If you are not starting early, you are actually missing the compund growth i.e. well known as compounding. When your money get's time to compund, it actually helps you to accumulate the wealth you need.
In my case, I have started investing in the stock market, with just Rs 1K and that too little late. So to make up to that loss, I have to invest more now so that I can complete my financial goals. Investing in stock market also requires some learning, so not only the compunding, early investors actually have time to learn the market and thus they can course correct it.
Taken ULIPs, like LIC, bajaj Finance
ULIPs or Unit Linked Insurance Plans is actually a combination of insurance and investment. ULIPs gives tax benefits but it's a very bad investment because of low returns. I have realized later that the returns are not great after investing for considerable time. For example, an ULIP which was sold to me and as a naive 23 year old I thought it might be good. I have started with Rs 1.5K per month and the maturity was after 10 years. So I have invested Rs 1.8 Lakh and got Rs 2.07 Lakh so my XIRR is just 1% which is quite bad. So that's why we should never mix the investment and insurance. We should take insurance seperately as well as we should do the investment seperately.
Pre Paid Loan, rather than investing in Market
When I have first taken the loan in my 20s for my 1st home. I wanted to close that loan as sson as possible, I was having an interest rate of 9%, and wheenver I had an extra amount I used to pre pay the loan. But now looking at the market returns where I am geetting above 15%, prepaying the loan was such a bad idea. Instead of prepaying the loan, if I would have invested in the market, I would have created a good corpus till now.
Holiday Membership - Waste of Money
I love travelling and love to explore new places. Looking at the hotel prices increasing day by day,holiday membership looked a great investent. I had to pay one time payment and I have some AMC charges. But looking at it now, it's actually a waste of money.
Because if that initial money kept in bank account would have yielded me interest that could help me to fund half of my travel expenses. Along with that I have to pay an AMC which is again a recurring fees every year. And not to mention that now I am not flexible enough to plan my dates and they have restrictions. So I have an opportunity cost involved, if I would have invested elsewhere I would have got good investment back from it.
Wrong Real Investment, no appreciation in 10 years
I have bought my first home when I was 23 years old, but it turns out to be a bad financial descicion. As the real estate market did not moved at all in the last 10 years. Though at the time of buying, I did not thought about it as an investment. But now when I am thinking of selling it, it is actually turns out quite a bad investment. The problem is the demand and supply, the supply has increased but the demand is quite less and thus the market did not moved at all in the recent past as it should have been.
These are some of my money mistakes I have done in my 20s and I hope that you should not do that in your 20s or even 30s. Starting investing early as well as staying away from any worng products is the best way to accumulate wealth for the long run.
Posted Using InLeo Alpha
