Dear Friends,

We have been hearing many fancy words like financial freedom, early retirement in these days. 

Compared to the yester years, there are many way that are widely available now to gain these fantastic thing in our life.

All we need to understand is that a disciplined approach in our savings and investments. 

In this article, we can see the five major common financial mistakes that destroy our wealth:

1. Miscalculating that cash flow will continue forever: 

Sometimes our business/income will be very good for a certain period in our life. For example, when all the gyms were closed during the Corona lockdown, Peloton's exercise bikes, which helped a lot of people to exercise from home. They were very popular. Believing that this excessive growth would "continue forever", the company incorrectly predicted that people would no longer go to gyms.

As a result, it built new factories at a cost of several thousands of dollars and manufactured millions of bicycles in excess of demand. When the situation stabilised after Covid-19 pandemic, their sales were drastically down and the company faced a major decline.

Some businesses will have a terrible pickup in some seasons, and they will invest in the entire market. Suddenly the trend would change. The first one you put in will be drowned in debt. Therefore, we should not increase our basic living expenses by believing that the business profit from a particular project is stable for all the time. 

2. Investing in an unknown business:

Even if we have experience in a field, investing money in a field that is completely unrelated is like gambling. V.G. Siddhartha, a popular businessman based out of India, built an empire in the coffee business through his famous brand- Cafe Coffee Day. He had immense knowledge in coffee plantations and retail trade. But he invested his coffee business profits in the IT sector and infrastructure industries that were unrelated to him.

Moreover, he mortgaged his company shares and took higher interest loans to make those investments in the IT sector. Although the coffee business that he knew was running well, the debt burden due to wrong investments in unknown fields really destabilised him. This ultimately ended in a huge tragedy of making him to commit suicide. 

3. Asking friends or social media advice instead of experts:

Many people invest money in the wrong/irrelevant schemes without consulting proper financial advisors. This is just because people close to them tell them to. Now it has become a trend to invest based on social media advice or with the advice of various so called financial influencers who were widely spread in the online media platforms. 

They quite often invest in risky penny stocks without any basic research by listening to the confidential information on the Internet or from the friends. It is wiser to seek guidance from industry experts rather than investing emotionally in unregistered private equity firms and virtual digital assets like in cryptos. I have known that many of my friends, have locked with their huge investments in crypto assets as the crypto markets are currently in huge down.

4. Borrowing at high interest rates:

It is quite difficult for any good business to generate 15% profit per year on a consistent basis. In such a situation, borrowing from equity firms at 30% interest or from moneylenders at 5% interest per month is make them to do suicide. Apart from this, if we fall into the traps like credit cards and instant loan apps, it is better to pay interest on all our income. If we fell into this, it would be hard to come out this quite easily. Buying a loan without knowing the real interest rate can destroy our wealth also. All our savings would go only to cover the interest amount for the debts that we have. All we need to have a proper debt management and debt recover plan for short term, medium term and for long term.

5. Not planning for emergency funds and cash flow:

Many people freeze all their money in houses or long-term savings. When a sudden medical emergency or job loss occurs, they may have all the assets but no cash flow, forcing them to borrow loan again at high interest rates. Real estate may be in bad shape at that time, and they may be asking for land at the rock bottom prices. The stock markets too may be at down. This may force them to borrow loan at exorbitant interest rates.

So, it is very important to have money on hand that can be withdrawn immediately for any kind of emergency needs. 

It is more important to know how to save money than to accumulate it.

So, keep all this in mind and to have a safe financial journey ahead in your life!