Financial planners are like doctors for your money. They regularly treat patients suffering the consequences of monetary mistakes. Here, financial planners diagnose 10 of the critical financial disorders people suffer from. They also share the remedies.
Disorder #1: Spending money you do not have
This is known as compulsive buying disorder. The patient tends to shop for anything and everything. It often leads to spending over and above your income, and may land you in deep debt.
Remedy: Decide on a limit per month and stick to it. If more money is required, honestly discuss with your loved ones where you spent the money and try to explain why you need more.
Disorder #2: Not planning ahead
These are the people who dig the well after the fire has started. Or plan for their kid’s education or their own retirement when the moment has already come. This leads to financial crunches and loss of peace of mind.
Remedy: Plan ahead for financial needs you know you will come across. A mutual fund investment in time may help you with goals such as wedding, child education, big purchases, retirement etc...
Disorder #3: Letting children be oblivious
Not exposing kids to money management early on is a mistake, because old habits die hard. If you don’t teach your children how to handle money and familiarise them with concepts like insurance and investment at an early age, they may not understand the value of financial planning.
Remedy: Let your children do household chores to earn their pocket money. Introduce them to the concepts of saving and investing using piggy banks.
Disorder #4: Staying away from investing
A dangerous problem could be the ‘Investments Too Risky Syndrome’. This may occur due to fear and a lack of knowledge. These patients prefer keeping their money in account or at home. They dread losing all the money, if invested.
Remedy: Learn the basics of investment. Begin your investment journey with usually low-risk options like fixed deposits and Public Provident Fund (PPF) or let a professional do it for you through mutual funds.
Disorder #5: Keeping all eggs in one basket
Investing all your savings in just one vehicle is a common problem. Suppose that option underperforms. Your lifetime savings would lose their value. Youngsters still have the possibility to recover from this. But those nearing retirement are most affected.
Remedy: Diversify. Develop a portfolio with the right mix of high-risk and low-risk investments. If you are nearing 60 years, you may focus on low-risk options.
Disorder #6: Deflating inflation
Inflation is a lethal virus. It can convert your money into worthless paper. Prevention is always better than cure here. Investing money in low-return options may involve low risk. But it is not possibly capable of fighting inflation.
Remedy: Diversify your investments. Ensure that the average of potential returns on all investments may cut out the effect of inflation. You may use equities and mutual funds to your benefit.
Disorder #7: Not saving tax
Not planning investments properly or not investing at all can be a problem. It may lead to you having to pay income tax. Instead, take measures to save tax and increase your disposable income.
Remedy: Invest in tax-saving options. Try PPF, National Savings Certificates (NSCs), and equity-linked savings schemes (ELSS).
Have you figured out which financial disorder you are suffering from?
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.