8 Financial Excuses You Must Get Rid Of Before The Start Of 2022

Each one of us hopes to realise the numerous dreams that we have. We start working towards making these dreams a reality been holding in our eyes since our growing years. And as soon as we gain some financial responsibility, whether in the form of pocket money or day-to-day college expenses from parents or a step ahead via our salary from the first job, we begin to try turning each dream into reality.

What holds most of us back from taking the right financial steps to manage our money and achieve all our financial goals, is sometimes our busy schedule or simply the lack of adequate financial awareness and willingness to know what and when to do. But irrespective of the reason behind your inaction, making an endless list of excuses just adds to the mayhem.

So, with just a handful of months left in the year 2021, getting rid of these common excuses/habits can ensure you kickstart the year 2022 on a financially stronger note:

Excuse 1 - I'm waiting for the ¡®right time¡¯ to invest

When advised to begin investing, many individuals shrug off this idea and insist on waiting for the ¡®right time ¡® to do so. There is, in fact, no perfect time to invest than today, to timely accumulate the desired corpus for various financial goals, without straining your liquidity and financial health. The earlier you begin investing, the more time your money has to create wealth and maximize the power of compounding. Whereas the more you delay and wait for the right time, the higher would be the chances of failure to accumulate the desired corpus in time.

But, before you begin investing, make sure you first identify your financial goals, investment horizon, risk appetite and then accordingly opt for the suitable asset allocation strategy to invest in the right investment avenues.

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Excuse 2 - I'll stick to FDs and ULIPs as they are safer

Even though the popularity of mutual funds has been on a rise in our country, a majority of investors still restrict themselves to traditional investment avenues such as fixed deposits, etc., which often fail to provide inflation-adjusted returns. Such investors must realise that mutual funds have something to offer for every kind of investor, whether risk-averse or an aggressive risk-taker. Thus, it¡¯s important to know the potential of mutual funds and how they enable wealth creation, especially for long-term financial goals.

For risk-averse investors, debt funds are an ideal investment avenue for achieving short-term goals maturing in up to 1-3 years, whereas hybrid funds can be a good tool for both risk-averse and moderate risk takers to achieve medium-term goals maturing in 3-5 years. As far as long term goals maturing after 5 years, equity mutual funds are the most suitable avenue, since equities as an asset class have over the past decades, been consistently outperforming both inflation as well as its peers such as PPF, NSC, NPS, ULIPs, etc. by a wide margin over the long term.

Moreover, to do away with the worry of timing the market, simply go for the SIP route of investment instead of lump sum. And even for those falling into taxable slabs, mutual funds have a solution in the form of ELSS funds, as these can be an optimal choice for availing the dual benefits of wealth creation and tax saving

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Excuse 3 - I don't need an emergency fund

No one amongst us can deny the fact that emergencies are an irreversible truth in everyone¡¯s life. And despite the rise in real-life instances depicting the uncertainties of life, the most recent being the deadly COVID pandemic which has shown how life can come to a standstill, many individuals still fail to be financially prepared to tackle financial exigencies which can hamper your income inflow temporarily, such as a sudden job loss or severe illness. Most people, especially young millennials, are either unaware of the importance of having a separate emergency fund or they just don¡¯t make much effort to actually build and maintain one. Always remember that, irrespective of your age, income, job profile, financial position, etc., it¡¯s equally important to create and maintain an adequate emergency fund to fall back upon when the need arises. Ideally, your emergency fund should amount to at least 6 times your recurring monthly expenses like rent, SIPs, utility bills, insurance premium, etc. And, while maintaining this rainy day fund, ensure that this fund¡¯s amount should proportionately be increased whenever your income and expenses rise in the future.

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Excuse 4 - Credit cards are bad, I don't want to use them

Another common excuse which people make for preferring debit cards and cash instead of credit cards, is that credit cards¡® high finance charges would only end up hurting their finances. Before assuming or believing such hearsay and misconceptions regarding credit cards, it¡¯s vital to understand that even though credit cards do involve high finance charges, these charges are levied only upon failure to pay the monthly bill on time, and in full. In fact, when used in a disciplined manner, credit cards offer a wide array of benefits such as reward points, discounts, cash backs, EMI facility, complimentary airport lounge access, etc. Thus, remember that the role credit cards play in your life, whether as a boon or a bane, depends entirely on how you use and repay them.

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Excuse 5 - I'll buy insurance later. There's still time

The primary reason behind most millennials still refraining from purchasing an adequate term and health insurance in their 20s is their misconception that these involve a high cost in the form of premium to be paid out, and this task is meant to be done later in life than in the initial stages of work life. Such people not only fail to understand the importance of timely purchasing health and life insurance, but also fail to understand that the more they delay, the higher the premium they end up paying. In fact, looking at the huge covers provided by term insurance, the premium involved is very low, especially when compared to other life insurance policies. Hence, ensure to purchase a term insurance cover amounting to at least 10-15 times your annual income. Moreover, to get assistance in tackling the sky-high medical costs, it¡¯s prudent to purchase an optimal health insurance policy for yourself and your family. Remember that in the absence of health insurance, a single instance of hospitalisation is capable of eradicating your entire savings.

Even as per Deloitte¡¯s recent Global 2021 Millennial and Gen Z Survey, healthcare and disease prevention is the topmost concern prioritised by millennials, signalling how important health insurance is and the rising concern and understanding amongst the younger generation towards the same.

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Excuse 6 - I don't make enough money, so I can't invest

Another commonly made excuse is of not being able to save. Ideally, it¡¯s advisable to try saving at least something from your income, irrespective of how much it is. Each little saving eventually adds up to a sizable amount in the future, especially when done continuously with financial discipline.

A good way to tackle this is by developing the habit to save first and spend later. So, by first saving a set amount per month, even if it's a small amount, and then spending the rest, would assist in instilling financial discipline, which certainly contributes to wealth creation in the long run. Moreover, as your income grows, avoid developing the habit of increasing your spending proportionally. Doing so would not let you benefit from rising income, which should ideally be utilised towards purposes like boosting emergency corpus, increasing investments, etc.

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Excuse 7 - Retirement is years away. I'll save for it when I'm 50

A big section of young earning millennials tend to procrastinate over their retirement investments, and instead prioritise fulfilling their more immediate financial goals and lifestyle expenses like purchasing a car, foreign travel, owning a home, etc. Most usually consider retirement planning as a distant goal, which can be attained in their later work-life years beginning in their 40s or even 50s. However, investing early allows your contributions to stay invested for a longer period and thereby, accrue higher benefit from the power of compounding. This will also allow you to build a bigger retirement corpus with much smaller monthly contributions.

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Excuse 8 - I don't need a loan, so why worry about credit score?

Possessing a good credit score is no less than a crucial financial asset today, with the potential to yield multiple benefits for one¡¯s financial health. This makes it vital for millennials to take steps towards building and maintaining a good credit score. Even if you believe that you do not require a loan or credit card at present or in near future, it¡¯s still a prudent move to remain credit ready by maintaining a high credit score. Remember that as life is uncertain, the need to avail loans may strike any day, and even for crucial and big-ticket life goals like owning a home and car, loans would act as a bridge someday to realise these dreams, whereas owning a credit card assists in tackling liquidity issues and avail a host of associated benefits they offer. Thus, irrespective of whether you end up requiring a loan or credit card, possessing a good credit score makes you a preferred applicant for lenders and boosts your eligibility as well as approval chances towards the form of credit applied for.

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