Money can’t buy happiness, but it can buy the flashing latest iPhone Model and I think they are kind of same thing. Jokes apart, no matter if you love it or hate it, money is very important. More than the worldly possessions, it impacts the quality of life we lead, gives us the independence of taking a decision and finally, the sense of achievement. But all this ‘Gyaan‘ that I just bestowed upon you all, didn’t come up by the virtue of being born in a privileged family. Rather, that fact worked quite the opposite for me. I never had to think for money twice and hence, when I started earning (peanuts initially), I never realized how my dad survived all these years. So today, I disclose the top money myths I had in my mind when I started off.
I already covered my top financial blunders a few days ago. And, when I reflect back on that post, I finally have an answer to all the mistakes I did. Schools, they don’t teach personal finance? Family? I never had to go through this! So, there were a lot of money myths I had in mind which were shattered the hard way as I grew up. Excited? Let’s get started.
1. Money and Money Matters:
I always coupled ‘money‘ and ‘learning how money works‘ together. Why do I need to kickstart my finlearning until I start earning it? Once I started earning, my thoughts were, it’s not just enough. I can barely meet my expenses. Once I start making more than sufficient, I would learn how to manage it. Increments happened and my lifestyle expenditure followed the similar trajectory.
To prove the above quote, here is an interesting fact for you: Over 70% of the lottery winners declare bankruptcy within 3-5 years, of winning. (Source). Instant money won’t bring the wisdom to manage it, it won’t bring the health to enjoy it. Therefore, stop waiting for getting rich to learn about money. They have no connection whatsoever. If you think this is a chicken and egg situation, you are wrong. Rather, learning about money will set you up for achieving your goals.
2. I don’t Need Personal Finance:
This one is pretty common amongst my peers as well. I tried to stall learning about money, taxation, insurance and investment. Why? Because I am not from a finance background. Since my work doesn’t demand it, why do I need learn about these complicated terms? Once required, I would hire someone to do this on my behalf.
Relatable much? For the ones who are thinking that there are financial advisors to assist them in their journey, let me break it out to you:
(A) Undoubtedly, financial advisors can give you a decent advice. However, there is a reason it’s called PERSONAL finance. Beyond the general thumb rules, there is plenty of room to customize the planning as per your requirement. Think about it, an advisor can help you plan for house, car etc. But would you seek one when you are planning to buy a new phone? Hospitalization? No right? In that case, you would need to understand and implement some basic principals yourself.
(B) It’s not that they are available for free. A good financial advisor would charge you a very hefty sum for managing your investments. Therefore, it’s better to opt for them only when you have a substantial sum in hand to play around.
3. Credit Cards == Emergency Fund:
For years in my professional life, I lived with the fact that credit cards can replace my emergency fund. That is how we are taught right? Credit cards are bad. Even if you own one, it is meant for emergency situation. And I conformed to this thought process. I never worked on my emergency fund until last year and thought credit cards would take care of that.
Never had I been so wrong. We think of emergency as a one time expense that would come and go. However, some emergencies are prolonged. You can be under financial distress for months. Credit card companies would demand the money back in the very next month. What happens in that case? What about all that additional interest you’d have to pay? God forbids, if you default, you are up for a massive penalty and one of the most expensive debts available in the country.
Also, I never believed in the concept of emergency. I thought that I have a term plan, health insurance, car insurance, everything. What kind of emergency could I anticipate after all? Turns out there are a lot. It would probably hit you when you least expect it. I’ll give you a quick example from my life. Recently, with no cash in hand, no emergency fund, I had to take a trip to my hometown to meet my sick maternal aunt. I had to shell out Rs. 30,000 from my non existent emergency fund. It took me 6 months to recover from that one credit card swipe.
4. It is Okay to Not File Returns:
Sounds like a disaster right? I really wish I could say it is not true. For first 3 years of my professional life, a CA uncle (my father’s friend) filed ITR for me. Since I had done absolute zero tax planning, he was able to fetch me a sum of about 10k every year post that little trick. I never bothered to pay attention how he did it and if I could save even more.
Until year fourth.. In the fourth year, situation turned upside down. He asked me to pay Rs. 34,000 as additional tax. What? And as a response, I thought it would be okay not to file the returns at all. After all I did not have any emergency fund.
That is when Mr. CA told me that I could be put behind the bars for not doing this. I knew it already, but many people evade tax right? Why me? The answer is pretty simple. Do the right thing, even if no one’s doing it.
5. Financial Planning is too Complicated:
Everything aside, I would blame my laziness for not acquiring the much needed financial knowledge. The key reason behind this laziness was a mindset that assumed financial planning would be complicated. Trust me, I gave up five times before finally learning the components of my salary slip. One of my colleagues (senior) decided to teach me about it for free. And guess what, I refused! Much wow!
When I think about it now, I feel nothing but embarrassed. Financial planning has become an activity that I enjoy a lot now. Every month, I look forward to budgeting, evaluating and projecting my future expenses. I love to see my little investments grow. I spend a lot of time in researching about unconventional investment instruments. This hobby has helped me sow seeds of the future growth.
With a red face and guilt that I started so late in my life, I am sure that many of you still believe in one or more myths that I mentioned above. Trust me, it is never too late to start good habits. If I can come out of it, of course you can too!
With complete honesty, who all can relate?
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Until next time..