Do not buy if you do not understand the financial product. Instead invest in a mutual fund
Financial harakiri is easier 'Done' than 'Said'. Most of us do not even realise when we get drawn into a vortex and we find ourselves deep in debt.
If you wish to protect yourself from financial harakiri (meaning financial suicide), then you need to follow the following steps:
Do not invest in financial products that you do not understand: It is seen that most people do not understand financial products so they end up buying products that may not be aligned with their financial goal. P V Subramanyam, a financial planner, says, "Do not buy if you do not understand the financial product. Instead invest in a mutual fund.''
Do not choose the wrong advisors: Often, investors take advise from their friends or family when it comes to buying equity. "Choosing the wrong advisor will lead to financial harakiri. Remember, upfront fees paid to the fianancial planner is better than hidden fees which may be higher,'' says Subramanyam.
Do not time the markets: Equities is a long-term game. Stay invested for the long term, at least 3 or more years.
Know yourself and your financial goals: Very often, most people are not clear about their financial goals. Hence there is a mismatch between their investments and the financial goals. "You must align your investments in line with your financial goals,'' says Gaurav Mashruwala, certified financial planner (CFP).
Know your expenses and your family budgets: It is seen that many persons do not have a cash flow statement and are not aware of the amount of money that they need to cover their family's expenses.
Do create an emergency fund: The idea is that such a fund helps in tiding over financial needs in emergency without having to break your investments. "We advise people to keep a mandatory reserve of three months (to cover expenses),'' points out Mashruwala.
Know how much life insurance cover you need: People don't have enough life insurance cover. "There are several who feel satisfied having Rs 2-3 lakh cover. Living on such low cover is financial harakiri,'' says Vishwajeet Parashar,- senior vice-president and head marketing, Bajaj Capital. "Get life coverage of about ten times of your annual income,'' he adds.
Do not mis-manage your credit card: Many people use multiple credit cards and do not repay debt on the due date. Instead, they roll-over the outstanding to the next billing cycle. ``They end up paying a higher interest of 36% per annum,'' says Parashar.
Avoid the debt trap: Excess debt is a sign that you are spending way more than you are earning. Make sure you are able to service the debt out of your earnings and not your savings, especially retirement funds. "Stay financially informed - Be aware of your credit standing by checking your credit report. If it shows sign of stress, develop a plan to tackle it. Practice financial prudence continuously to maintain good credit score and avoid debt trap,'' says Nimilita Chatterjee, senior VP – products, analytics and data operations, Equifax.
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
)
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
)
){kind=small}
){kind=small}
)
)
)
)
)
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}