In all my financial interactions – be it planning for clients, training, teaching or writing, people have come to me with some problem which they think is unique. In all the financial problems, I am able to find a pattern. Believe it or nor, people more often than not choose the problem by their behavior. It is easy for me to find a pattern and say, “Well you chose your problem, did you not?”

Your financial problems would have been caused by some (or all) the following financial behavior:

~ Not planning: The single biggest problem for most people is that they just do not plan their finances. Even if they are not happy about the results of what they have done so far, they do not change the way things are done.

~Not seeking advice from the correct source: Amazing that people who are related to people in mutual funds, life insurance companies, banks, or first cousins of financial planners etc. do not consult them. Once in a while sheepishly my ‘friends’ and ‘cousins’ allege that I help them financially – in terms of advice. I refuse to even acknowledge some of them in public.

~ Overspending: Many people with not very high incomes have very high ambitions. Most of this problem is because the salesmen in most shops do not tell you the price of a product, they only tell you the EMI — so anything from a plasma TV to a luxury home on the outskirts of the city are made to look cheap! After all at Rs 2,899 a month does a plasma TV not look cheap?

~ Not talking finance at home: Children are kept away from the finance topics at the dining table. Finance is perhaps the second most taboo topic at home! So many children grow up without knowing how much of sacrifice their parents have gone through to educate them. Or the foolish financial products that they have bought.

~ Parents spending on education and marriage: There are just too many kids out there who believe that they need to worry about savings, investment and life insurance only at the age of 32 plus. This means your father, father-in-law or a bank loan has funded your education and marriage. Kids should take on financial responsibility at a much younger age than what is happening currently. Of course one girl told me “My parents want the tamasha, let them pay for it. I wanted only a simple marriage!

~ Marriage between financially incompatible people: Most marriages under stress are actually under financial stress. Either the husband or the wife is from a rich background and the other partner cannot understand or cope with the spending pattern. It is necessary to match people financially before marriage.

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~ Delaying saving for retirement: “I am only 27 years old why should I think of retirement” seems to be a very valid refrain for many 32 year olds! Every year that you delay in investing the greater the amount that you will have to save later in your life. Till the age of 32 it might be feasible for you to catch up, but after some time the amount that you need to save for retirement just flies away. www.myirisplus.com
~ Very little life insurance: With all the risks of life styles, travel, etc. illness and premature death are common. We all have classmates who had heart attack at the age of 32 but still pretend that we do not need life or medical insurance.

~ Putting away too much in a pension plan: I refuse to elaborate it here. Call me or email me.

~ Not prepared for medical emergencies: Normally big emergencies — financially speaking — are medical emergencies. Being unprepared for them — by not having an emergency fund is quite common.

~ Lack of asset allocation: Risk is not a new concept. However, it is a difficult concept to understand. At 3k index people were afraid of the market. At 21k everybody and his aunt wanted to be in the equity market — and there are enough advisors who keep saying, “Equity returns are superior to debt returns.” This is true with a rider — in the long run. So there could be a much larger allocation to equity at higher prices — to make for the time missed out earlier.?

~ Falling prey to financial pitches: The quality of pitches has improved! Aggressive young kids are recruited by brokerage houses, banks, mutual funds, life insurance companies, etc. and all these kids are selling mutual funds, life insurance, portfolio management schemes, structured products, et al.

~ Buying financial products from ‘obligated persons’: This is perhaps one of the worst things you can do in your financial life. A friend, relative, neighbor, colleague who has been doing something else suddenly becomes a financial guru because they have become an agent! You are saddled with a dud product for life!

~ Financial illiteracy: Most people do not wish to know or learn about financial products. They simply ask, “Where do I have to sign” — so buying a mutual fund is easier than buying life insurance!

~ Ignoring small numbers for too long: What difference will it make if I save Rs 1,000 a month? Well over a long period it could make you a millionaire! So start early and invest wisely. It will make you rich. That is the power of compounding.

~ Urgent vs important: Most expenses, which look urgent, are perhaps not so important — the shirt or shoe at a sale. That luxury item which was being offered at 30 per cent discount is such an example. These small leakages are all reducing the amount of money you will have for the bigger things like education or retirement.

~ Focusing too much on money: Money is no longer a commodity to buy things. It is a scorecard of one’s life. That will cause stress, and yoga might help. However if you will seek a branded yoga teacher — so that your friends think you have arrived, yoga it self could cause financial stress!