We all want to save money, and we should. In fact, there’s hardly a New Year resolution that doesn’t involve saving money. Having said that, in our pursuit of saving money many of us do some insensible things that cost us dearly in the long run.
Wrong assumptions lead us to take some crazy steps that have the potential to jeopardise our savings.
Let’s discuss some of these ‘saving money’ misconceptions that can jolt our financial foundation.
1. Neglecting Essentials to ‘Save Money’
You did a good job by curbing the temptation for that smart brown formal shoes that were available at a mouth-watering discount on Lazada (you already own 3 working pairs, don’t you?). But you’re crazy not to go to the dentist thinking that’ll cost you a lot and you should avoid that.
Many of us make this mistake of not prioritising critical things assuming that’ll impact our savings. But in doing so, we expose ourselves to major complications in the future that can cost us a bomb and dent our savings.
Here are few common examples:
Not maintaining your car
Many of us compromise on our car servicing thinking ‘it’s a waste of time and money’. Well, it’s blunderous if you think so. Those timely engine checks and tyre changes are very important, whether you like it or not.
If you ignore your car expenses, possibilities are that you can face terrible situations like a broken down vehicle with your family on board in the middle of nowhere, or worse, a major accident.
In dealing with both these situations, you are bound to lose a lot from your savings, we bet!
Ignoring health expenses
Similarly, regular health checkups are a must, especially if you’re above 30. But there are many who foolishly disagree to this, often overestimating their health status.
Bottom line being, don’t skip your health checkups to ‘save money’. You’ll regret later when you’ll be forced to spend a huge amount in tackling an avoidable health complication, apart from the agony that you and your family will go through.
Then there are others who don’t buy a health insurance erroneously deducing that it’s a wasteful expenditure. Again, don’t make this mistake, and buy one if you haven’t yet.
And what about our spectacles? There are many who believe expensive prescription glasses are an extravagance and are best avoided. That’s certainly not true. You may buy cheap frames (even that’s not advisable) but come what may do not compromise with high-quality lenses as they have a direct bearing on your eyesight.
Buying cheap electronics, furniture
In order to ‘save money’ we often settle for cheap or unbranded electronic appliances, furniture, and personal grooming products — only to regret later.
Be it that cheap tablet that conked off in few weeks, or a sofa set you purchased online ‘at 70% discount’ whose springs gave way soon after the warranty expired and now demands an expensive repair — you’ll eventually realise that such ‘deals’ are not worth in the long run. In fact, they’ll burn a hole in your pocket later.
Even with those really ‘value for money’ shampoos, moisturisers and mascaras, never forget that (God forbid!) a dermatological or an ophthalmological treatment will be anything but cheap.
We don’t mean to generalise that only expensive, branded products are good, but then again we must walk the extra mile to ensure we don’t compromise with the quality of products we buy.
2. ‘I Don’t Have Enough Money to Save’
Many of us firmly believe that our modest earnings leave no scope for savings. Well, that’s not a right approach. You should always target to save at least 20 percent of your monthly salary, come what may, and make it a habit.
Remember, ‘I-don’t-have-enough-money-to-save’ is just an alibi. Even your modest savings will gradually grow into a considerable amount that can be used as an emergency fund. You’ll also feel upbeat when you’ll see a good amount set aside which will inspire you to continue saving.
3. Putting Entire Savings in One Place
Then there are some of us who save regularly, but park all their funds in one place, like a savings account. You must also aim to gradually diversify your savings by investing in multiple channels.
If your risk appetite is low, start with putting some fund in fixed deposits which fetch higher returns than a savings account. Also aim to eventually invest small sums in low-cost index funds, peer-to-peer lending, stocks, etc. keeping in mind these investments bear risks but have the opportunity to be more lucrative nevertheless.
In any case, do proper research, compare to find the best options available or seek an expert’s help if needed before investing.
4. Changing Jobs Frequently for Bigger Savings
Sometimes we feel that the main reason why we’re not able to save is that our job is not paying us enough. As a result, we frequently change jobs, aiming for huge salary jumps every now and then. Well, there’s a big problem with this approach.
Frequent job changes reflect poorly on resumes and might hurt you badly in the long run. They symbolise that the candidate lacks sincerity, seriousness, and loyalty to his/her professional obligations and is bound to drive away many hiring managers in the future.
So unless you have a compelling reason, which is not just about your pay, try to stay in a job for at least 2-3 years.
5. Gambling to Boost Liquidity
We all know gambling is an addiction which seriously damages our financial standing, yet there are many in our country who indulge in activities like online gambling. Even the government has declared a war against this ‘social cancer’.
So if you happen to be a person who thinks gambling will boost your income and savings, even if you’ve been lucky in the past, you really should reconsider.
Gambling will sink you and your finances, and you must do everything possible to quit this vice.
6. Taking a Personal Loan to Grow Your Savings
Yes, you heard that right. We are used to receiving personal loan promotional calls all the time, and sometimes we do consider taking the loan just to ‘keep our savings’ and have some liquidity. But it’s certainly not a great idea.
Personal loans come without collateral, and hence attract a higher interest rate than other loans like car loans and home loans. Consider taking a personal loan only when you have a pressing reason, like weddings, house renovation, credit card debt, etc. and you’re unable to raise the capital to address those requirements.
Increasing your savings fund is not a good enough reason to take a personal loan, simply because you’ll have to pay back in instalments with higher interest. Rather, plan to set aside a particular portion of your earnings every month and stick by your plan.
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