The Coronavirus (COVID-19) pandemic has created havoc around the world. It has hampered the well-being of people and has led to an economic slowdown. Due to this, it has become challenging for many people to manage their finances efficiently. People have learned some harsh realities, and it is time to bounce back and improve our economic conditions.
Many people are confused about how to invest money in the right financial instruments. However, before that, they should understand the fundamentals of investments. Here are ten bad investment habits that you avoid want to grow your wealth and improve your monetary condition.
- Having no health insurance
If you do not have health insurance, you are risking your savings to a great extent. The cost of hospitalization, especially during the COVID-19 pandemic, has increased significantly. Uninsured COVD-19 patients have faced major financial problems. Buying health insurance is advisable, as it can help you cover the medical expenses and cost of hospitalization that can safeguard your savings.
- Not investing in life insurance
Just think about how your family will survive in case of your untimely absence, particularly if you are the sole breadwinner. You need to have a life insurance plan to secure your family’s financial future. While purchasing life insurance, ensure that the sum assured should cover all the household expenses and liabilities. This plan should help your loved ones achieve their financial aspirations.
- Not building an emergency fund
Emergencies can come unannounced. What if you meet with an accident or test COVID-19 positive? Do you have enough liquidity to cover the medical and hospitalization expenses? These are the times when emergency funds come in handy. You should have a reserve of equal to or more than six months of your monthly income.
- Not having diversified savings
Due to the ongoing pandemic, many banks had to face a financial crisis. They had to levy a limit on withdrawals that made it difficult for people to manage their finances. It was an eye-opener for many to diversify their savings in different banks to reduce such risks.
- Focusing on investments that offer guaranteed returns
Instruments with an assured income have low-interest rates, and you will not earn a good return on investment. Instead of these products, you can consider investing in other types of investments, like Unit-Linked Insurance Plans (ULIPs); you can earn lucrative returns if you invest in them wisely.
- Investing in instruments that performed well earlier
If you are planning to invest in gold this year, then you are making a wrong move. In December 2019, the rate of gold was INR 39,076 per 10 grams, which increased to INR49,170 as of 12th November 2020. Investing in gold at this rate is not advisable, as the price is already at its peak. Even if the rate rises, you will not be able to earn much. So, search for investment options that can help you make higherreturns on investment.
- Maintaining a poor credit history
Due to the economic shutdown since the end of March 2020, millions of people struggled to repay their debts on time. The moratorium of loans gave a breather, as people got some time to repay their dues and avoid being charged compounding interest. However, this scheme was only for people who paid their dues on time until February 2020. In a poor economic scenario, the non-payment of dues on time can result in a massive financial crisis. Therefore, it is crucial to have a contingency fund.
- Having credit card debt
Using your credit card to fund your lifestyle is a poor habit, which can become a burden if you cannot repay the debts within the interest-free period. Paying the dues on time will ensure that you have a good credit history.
- Not having a budget
It is essential to have a monthly budget and stick to it, as the ongoing scenario is unpredictable and it demands forced savings.
- Not making the family aware
It is vital to keep your loved ones informed about all the assets and debts you have, and what they need to do when you are no longer around. Preparing a will is an excellent idea, as no one knows what the future holds.
Now when you know how to invest money, inculcate a savings habit.Invest smartly in the appropriate financial products out of the various types of investment plans available in the market.