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Many aim for smooth finances, but many falter due to mistakes, poor planning and persistent money myths.
Financial independence isn’t just about income. (Representative Image)
Many people dream of a smooth financial journey, but for every one who manages it well, several stumble along the way. They encounter hurdles such as falling short of their savings goals, making costly tax mistakes, neglecting health coverage, failing to plan for inheritance, or even choosing the wrong career path. While lack of awareness and interest play a part, deeply ingrained money myths can be equally damaging.
Breaking free from these misconceptions is essential to building and protecting your wealth.
1. Young People Don’t Need Health Insurance
It’s a common belief that health insurance is only for older adults. However, even those in their twenties and thirties can face unexpected medical emergencies, from accidents to sudden illnesses. Modern lifestyles have also led to a rise in chronic diseases like diabetes and hypertension among younger age groups. Securing coverage early not only protects against unforeseen expenses but also allows waiting periods for pre-existing conditions to pass while you’re still healthy, ensuring faster access to benefits later.
2. Retirees Should Avoid Equity Investments
While retirement often means a shift towards safer investments, completely avoiding equity can be risky in itself. With people living longer, the retirement phase can last decades, requiring a portfolio that grows enough to keep pace with inflation. A balanced approach, such as investing in equity for funds that won’t be needed for several years, can help ensure that your savings don’t lose value over time.
3. No Tax Liability Means No Need to File Returns
Many believe that if they owe no tax, filing a return is unnecessary. In reality, income tax filing can still be mandatory based on your income threshold, expenses or specific transactions. Filing is also essential if you are expecting a refund, want to claim carried-forward losses or need to comply with reporting rules for certain types of spending. Skipping it can mean losing benefits and facing compliance issues.
4. Home Loan Tax Benefits Make Prepayment Unwise
The tax deductions available for home loan interest and principal repayment have led some to keep their loans for the full term. However, in certain tax regimes, these benefits may not outweigh the advantages of becoming debt-free earlier. Reducing your loan tenure or prepaying can bring peace of mind, free up cash flow and reduce long-term interest costs.
5. A Single Income Source is Enough
Relying on just one job or business can be risky in today’s economy, where layoffs, technological disruptions and industry downturns are increasingly common. Building multiple income streams, whether through side gigs, rental income, freelance work, or investments that generate returns, creates a financial safety net that can protect you in times of uncertainty.
6. Mutual Funds are Risk-Free
Mutual funds, while often perceived as safer than direct stock investments, are not risk-free. They invest in assets like stocks, bonds, or market-linked instruments, all of which carry some level of market, interest rate, or credit risk. Even index funds can fluctuate in value and debt funds are not immune to volatility. Understanding these risks is crucial before investing.
7. Only Older People Need a Will
Creating a will is not about age; it’s about responsibility. Anyone with assets, whether physical, financial, or digital, should have one to ensure they are passed on according to their wishes. Without a will, asset distribution can become complicated and cause hardship for dependents. A will can be updated anytime, making it a flexible yet essential planning tool.
8. Parents Must Save for Their Child’s Wedding
While many parents feel obliged to pay for their children’s weddings, prioritising this over retirement savings can jeopardise their financial future. Focusing on funding education and fostering independence enables children to take responsibility for wedding expenses themselves. Financial security in later years should not be sacrificed for a single event.
9. Hiring a Financial Planner Means No Monitoring is Needed
A financial adviser can help guide investments, but ultimate responsibility lies with the investor. Regularly reviewing your portfolio ensures it aligns with your goals, market conditions and personal circumstances. While there’s no need to micromanage, understanding the big picture helps you make informed decisions and avoid surprises.
10. No Need to Share Financial Details with a Spouse
Keeping financial information to yourself can be risky for your family. In the event of an emergency, an uninformed spouse may struggle to access funds or navigate accounts. Sharing details of investments, accounts and passwords ensures that your loved ones can manage finances effectively if needed, preventing unnecessary stress or loss.
A team of writers and reporters decodes vast terms of personal finance and making money matters simpler for you. From latest initial public offerings (IPOs) in the market to best investment options, we cover al…Read More
A team of writers and reporters decodes vast terms of personal finance and making money matters simpler for you. From latest initial public offerings (IPOs) in the market to best investment options, we cover al… Read More
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