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7 Money Mistakes to Avoid to Grow Rich Research Team | Posted On Wednesday, July 08,2015, 03:50 PM

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7 Money Mistakes to Avoid to Grow Rich



There is a famous saying “The person who doesn't know where his next rupee is coming from, usually doesn’t know where his last rupee went”. Do you want to be that person? If not,  these are the 7 money mistakes to avoid to grow rich.

You are good with money… You will manage your money alone

The biggest mistake you can make while managing your wealth is to think you can do it alone. You may be well qualified, even have an MBA in finance.

But there’s a problem. You may not have the time to manage your money. How can you concentrate on your work and manage your money at the same time. You cannot simply say…I have no time. I will just put my money in shares and see it multiply.

This is when you require a finance professional to manage your money. Your money needs to be invested in equities or debt, based on your risk profile. You will also need to avail insurance such as a health insurance or a life insurance plan.

These professionals can help you grow financially and increase your wealth.

You depend on only a single source of income

You must never depend only on a single source of income (say your salary), no matter how large it is. There is a famous saying by Warren Buffett“Never Depend On Single Income. Make Investment to Create A Second Source”.

To create wealth, you have to make investments, which give you a second source of income. You reside in your own home. You buy a second house which you give on rent. This rental income paid to you each month, becomes a second source of income. This is wealth fortification. Money begets Money. Use your money to get more money.

You pretend to be rich

You pretend to be rich to impress others. You buy expensive shoes or clothes or even a designer bag, though you cannot afford it.

You might even borrow to buy these items. Yes, the rich and affluent do throw their money on cars, yachts or even vacation homes. This might seem a poor investment and it looks like the rich and affluent, are wasting their money on extravagances.

These rich people have become rich through sound financial and investment planning. The money they spend is nothing compared to the abundance they have.

Remember: Loans especially personal loans charge a high rate of interest. If you borrow and spend heavily to impress people (Many of whom you don’t even know), you will fall into the debt trap.

You don’t earn…You only save

You feel guilty for overspending on that family vacation. You resolve to save money and do so by denying yourself almost everything you can think of. At home you unplug every electronic item from its socket. You expect to save money on your electricity bill through this drastic move.

While saving per se is not a bad idea, you also need to earn money. Yes,   the rich do not waste their wealth, but they also earn a lot. There is a limit on what you can save, but no limit on what you earn.

Remember : Invest in your career. It is the engine of your growth.

You neglect life’s changes

You are newly married. Your life has now completely changed. You no longer can enjoy the happy days of being single and carefree.

Those movies may have to be cut down. Those picnics and vacations may have to be put aside. You have to think about spending on your spouse or soon to be born child.

You have to adjust your spending keeping in mind the changes in your life. If you were a heavy investor in shares, you would have to shift some of your money to debt. Think fixed deposits….

Think of a cricket match. When your team loses a few wickets, the new batsman has to consolidate the runs .He avoids taking risks while batting.

You do not save money for an emergency

Life is full of surprises. Some of these surprises can be pretty nasty. You might need money in a hurry, for the medical treatment of a close relative.

How will you get this money if you live just for the day? You must have emergency savings enough to meet your expenses for at least 6 months.

God forbid…if you lose your job, this money could be very useful.

You neglect estate planning

What is the use of all the money in the World if you cannot pass it on to your loved ones?

If you die intestate (Without making a will), your loved ones will spend the rest of their lives fighting over your property. In the absence of a will, your property will be divided according to the rules of the Nation.

You will have no say in the division of your own property. Making a will even when you are young, can prevent a lot of family disputes. You can also donate your money towards philanthropic activities (Causes close to your heart).

Estate planning is now big business. Videotaping of a will, making of an online will or even putting your money in a trust, is done not only by the rich, but also the middle class.

Growing rich is serious business. You cannot make simple mistakes and hope to grow rich. Avoid these 7 money mistakes and grow rich.

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