5 dumb money mistakes and how to avoid them

As somebody who deals with money we all make decisions on saving, spending and investing it. Decisions that sometimes make us feel either wise or dumb.

But then we come to conclusions (of either being wise or dumb) only after our money decisions either reward us or punish us.

Have you ever been guilty of making dumb money mistakes?

Or felt proud that you made a decision because you reaped excellent rewards.

Send us your stories -- of either wise money decisions and how it rewarded you or dumb money mistakes and how to avoid them -- to getahead@rediff.co.in and we will publish the best right here on Rediff.com.

Meanwhile .

The author is co-founder and director, Perfios software Solutions Pvt. Ltd. (www.perfios.com). Perfios offers an online Personal Finance Software Solution that provides a 360 degree view of one's Personal Finance with very little manual effort.

 

These days every credit card in India has so many offers around it that paying for your grocery, mobile bills, fuel or any other item where card is accepted has become a dumb activity!

Imagine a card which give a 2 per cent cash back on all your fuel expenses; imagine a credit card which gives 5 per cent cash back on all grocery spends.

Many cards also offer seasonal offers on maximum spend for a month or so and you get add-on cash back. Going by the trend it looks like paying for anything by cash is not a good idea.

These days there are offers on debit cards as well! (Cash is debited from your account as soon you pay from a debit card, but then if you have an offer running you grab it!)

Note: Be sure you use your credit card smartly and make your outstanding before the due date.

Again, beware that use of plastic money is an art and hence how promptly you make outstanding payments is also important! If you have not been doing so then all the benefits you get that a card offers and cash back offers goes waste, hence ensure that you pay your bills just in time!

You should know how many days it takes to get your payment reflected in your card account, accordingly pay only those many days in advance!

No need of paying out your bill on 5th (just because you got your salary and you want to clear all dues, paying out bills way too in advance is not a good idea) when your bill might actually be due on the 15th!

You better enjoy the 3.5 per cent interest that bank gives you on your idle money in your account.

This is a big grey area and not everyone knows that if you close your loan, bank will actually penalise you!

Logically speaking, banks should reward you because instead of paying money in your monthly EMIs you are actually giving them the entire money in one shot!

Let's start from the beginning: as soon as your loan starts the EMI component comprises of maximum interest and least principal amount. So even if you are closing your loan in the last year of your tenure -- you would have actually paid all interest amount for your entire tenure but still when you go to them for closure of loan, they will charge you nothing less than 5 per cent of the outstanding principal amount -- so now you can add up this interest to your existing interest rate!

DO NOT close your loan unless it is REALLY necessary!

Ok, first things first. Investment and life Insurance cannot be written in the same line.

Either you do life insurance or do investment. Life insurance as the name suggests is meant only to insure you life (take a term plan); do not take it as an investment; there are multiple charges that you need not pay (as part of your premium) because your intention was never to buy an insurance cover!

For investments there are multiple other options like systematic investment plans in regular tax saving mutual fund schemes or government bonds etc.

Do not buy stocks just because your friends bought few and made money out of it!

Many of us discuss between friends and end up making hasty decisions.

You CANNOT predict any stock movement; you may watch many business channels and listen to enough experts and decide to buy few stocks that may go up in a specified time.

Please note that there is a disclaimer in whatever they say. Understand your risk appetite and act accordingly, please note that it's a gamble without any guarantee for your money; it can go either way so be attentive and act accordingly.