Money matters: Seven sins & financial planning

Dec 31 2012, 12:28 IST
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Cleanse yourself from the sins that keep you from reaching your financial goals.  (THINKSTOCK) Cleanse yourself from the sins that keep you from reaching your financial goals. (THINKSTOCK)
SummaryCleanse yourself from the sins that keep you from reaching your financial goals

Financial planning is a necessity for those who seek control of one’s daily affairs and wishes to create wealth. They why is it that most of us do not have a financial plan or have not even given this a thought? Why is it that we keep trudging along and feel that all will become right one day? Why is it that we always think of how to earn more but hardly give a thought to what our earned money is earning along with us?

Most of us have not even thought of having a dual income stream — one from our work and the other from our investments. Whether we accept it or not, each time we think about creating wealth, there are seven deadly sins that stop us from doing so.

Pride: This is caused by excessive belief in one’s own abilities. This happens because in school we were taught to believe in ourselves, but that belief was with knowledge. The sin is committed when we believe in ourselves and choose to act without adequate knowledge. All we have is just some idea of what is the best investment and believing it to be the best for us, we forever commit that sin under the pretext of “I know how this works.”

Envy: Just because you have seen someone else make a killing it is not enough reason for you to take the plunge as well. It might turn out that you took the plunge at the wrong time. We all know the old age wisdom, “Do not break your own hut by seeing someone’s palace.” Then why do we change our asset allocation and bet on something that has worked for another? The time and situation can be quite different.

Gluttony: If you have credit card debt — for sure you are committing this sin every day. If you have taken a loan for a depreciating asset that’s and example of financial gluttony. However, if you are managing the instalments of such a depreciating asset from investment returns then you are smart.

Consuming beyond your means was never a smart idea in any age or generation. Just because you must have it and the fact that instalments can make it easier to obtain does not mean that you should compromise your position. By choosing to consume beyond means you have extinguished that money and have also compromised on the

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