Top 10 Financial Mistakes That People Make

Error 1: No "safety cushion":

The vast majority of people believe that any accumulation of completely useless: all lose anyway, so why save when you can spend it all now and buy some necessary thing? Perhaps a specific moment of life decision may seem true, but after some time, you may need a certain amount of contingency: minor repairs in the apartment or pay medical or increase the rent or salary delays ... Referring pay these expenses if no savings at all? Credit may not give, and to receive it often takes several days or even weeks, and you may not be this time.

That is why it is important to remember about the first rule: you should always have a savings of $ 3-6 monthly cost of an emergency.

Error 2: Reserve "under the mattress" rather than bank:

In Russia, at least 50% of the population use bank deposits to 5% - are investors in the stock market. And for the reason that few people trust some financial instruments, preferring to keep the accumulation of houses under the pillow / mattress / in the bedside table, and others. In fact, this kind of "investment" provides a guaranteed income minus 10-13% per annum! The reason is simple - inflation. So, your current 500 thousand. Rub., Placed in the nightstand, turn 5 years already 310 thousand. Rub. with an inflation rate of 10% per year.

So the second rule: do not keep accumulating in the bedside table - it is better to place them at least for a bank deposit to save from inflation. Are you afraid of a bank failure? Teach that when placed in a bank up to 700 thousand. Rub. If you revoke his license, you are guaranteed to return the contribution to the safe and sound thanks to the deposit insurance system.

Error 3: Improper loan options:

When choosing a loan, it is important to remember that it should:

• Be in the currency in which you get your salary. Most often it is Dollars. If tempted to take out a loan in foreign currency at a lower rate, then you can get the growth of your monthly mortgage payments by 30-50% due to the devaluation of the ruble;
• Not be too large: take a loan is not "with reserve" just in case, namely the amount that you need. Note that taking extra 50 thousand. Rub. on credit, you must return the bank is already 75 thousand. and more;
• Not be too long: take credit for the time that the loan payment was feasible for you, but not too low. Please note that the loan of 200 thousand. Rub., Extended for 5 years instead of 2, will lead to the need to pay the extra 110 thousand. Rub. jar.

So better to take a loan in rubles, for the most desired amount and for a minimum period, to payment on the loan amounted to 20-30% of your income.

Error 4: The chase for yield:

The risk-free yield is higher than the interest on deposits does not exist. Therefore, the income above 12-17% in rubles and 5.9% in foreign currency are guaranteed associated with risk of loss of some or all of your savings. So when I saw an advertisement for a guaranteed yield higher interest on deposits, it is better to bypass this company party, t. To. With very high probability it will be a pyramid scheme.

Top 10 Financial Mistakes That People Make

Error 5: Investment without a time limit:

It is not possible to invest properly if you do not know for a particular purpose is made. The "earn" - is not the goal. The aim should be time, cost and priority. Only by clearly defining it can intelligently find the right tools for you to invest. So, if you invest with a view to save up some important goal in 1-3 years, it is better to prefer bank deposits and highly reliable bonds or bond funds.

If it is a goal of 3-10 years, in addition to deposits and bonds, you can add to your portfolio of up to 50% of the shares or equity funds. Well, if you invest for 10 years or more, it is possible to increase the stake to 70-80%.

Error 6: Underestimating their response to risk:

If your co-worker or neighbor will invest in equities and rejoices yield of 20% and higher, it does not mean that you have to buy them immediately. The fact is that each person - their level of risk appetite. And if your neighbor is willing to tolerate at times fall in the value of its shares to 50%, then you may be not ready for this, you sell stocks just at the wrong time, get losses and investments will be disappointed.

It is therefore very important to correctly identify their risk tolerance: if you are not ready for a significant drop in the value of your investment, place most of the funds in deposits and reliable bond. If you are ready to swings size of your savings - can be a significant portion of their place in the action.

Error 7: Neglecting insurance:

The Russian insurance Apartments, machines and the more life is unpopular, t. To. The majority believes that they just do not happen. Life is insured by less than 2% of the population, although one of the most common causes of delinquency and defaults on loans are just incidental expenses for treatment. Such costs to repair flats for compensation flooded neighbors below, to restore their health in most cases are unexpected and require substantial expenditure to which not everyone is ready. Therefore, property insurance, liability and life is the key to confidence in the future of each person.

Error 8: Start saving for retirement for a couple of years before it:

The pension as a financial goal is rarely one meets a large part of the population about it not even think putting "for later". Meanwhile, if you want to retire at 40 thousand. Rub., Then you need to set aside each month for at least a bank deposit of not less than 25 thousand. Rub. for 10 years! If you remember about the pension for 3 years before leaving her, then retired 40 thousand. Rub. you will have 3 years to postpone to the deposit already 130 thousand. rub. per month. So you need to think about retirement at least 10 years before.

Error 9: Ignoring tax benefits:

Not so many people know and enjoy all kinds of tax deductions. In the meantime, anyone can get into the account each year to 15 600 rubles., If he pays for training, treatment, invested in their retirement or was engaged in charity work. If you buy an apartment or a house, you can get the account up to 260 thousand. Rub. plus additional compensation for interest on the loan for the purchase of real estate. Thus, at the mortgage in the amount of 5 mln. Rubles. 15 years at 12% the use of tax deductions on interest would return 13% of the amount of interest paid on the loan - more than 750 thousand. rub.

Error 10: No personal financial plan:

Personal financial plan - it's basically a rarity. But his absence may lead to serious consequences. For example, if a person thinks only of buying a car in a year, but the purchase of an apartment at 3 years and payment of education of his son after 10 years, he has no plans, it may well be that he has accumulated the required amount on the car, but the increased transport costs It does not allow him to accumulate the amount of a down payment on the mortgage. As a result, he will buy an apartment without down payment, with a smaller area than we would like, because the more he did not have enough opportunities.

Because of the large credit payment will not be able to save a total of training his son, and he will not act in the best university to get to the free office. If by that time education will be fully paid, son just did not have anything to receive it. On retirement the person in question and can not speak. And all this adverse scenario has occurred only because the person in front of him had only one goal, not a full-fledged financial plan that takes into account the target until retirement.

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