FINANCE SPECIAL..... CA S H C U S H I O N

CA S H C U S H I O N 
 

Common errors youth must avoid 

   Everyone should appraise their financial needs and be responsive to products and services that are available in the market and which suit their requirements.
    Here, we highlight some of the mistakes that are generally committed by youth during their financial planning.

No clear goal: Everyone needs to set a financial goal and plan accordingly for achieving that goal. For example, goals can be buying a house, retirement planning, children’s education or marriage, wealth creation, etc.
Not clear in investment objective:
Today’s youth are carried away by misleading advertisements, and often invest as per their wish. This results in deviating from their financial goals. They do not map assets like mutual funds, insurance, fixed deposits, etc, to their future goals.

 Keeping money idle in savings account: Due to a frantic work environment and indolence otherwise, monthly savings accumulate over time in bank accounts. Suddenly, people realize that there is too much money lying idle in their account. This leads to impulse buying and affects their financial goals.
Delay in retirement planning: Delay in retirement planning will lead to additional outflow later.

Getting into bad debts and loans:
Most debts can be avoided by postponing a decision to buy something. Whenever the loan’s interest rate goes up, the worries associated with it also go up. Retaining the same EMI and increasing the loan tenure leads to a default, and at times also affects cash flow.
High risk or no risk: Individuals are either risk-averse or risk-seeking by nature. Taking risks is not gambling, but one needs to balance it judiciously.

Ignoring insurance: Today, most of the youth are under-insured and financially under-protected. Insurance helps in protecting financial goals. t Back-up plan: In order to achieve their financial goals, one should have a back-up plan in case of a reduction in income, retrenchment or business loss.
Unwilling to discuss money matters with family members: This will result in upsetting their financial goals since their cash flow will be affected in case of any emergency expense.

Liquidity: Most people lock more money in illiquid assets, or maintain too much cash. They should periodically look into this in order to achieve their financial goals.
Inflation bites: Many people save instead of investing, which leads to unpreparedness for inflation.
    N C Ramesh The author is a Chennai-based  financial advisor ETSWA 121127