When we talk of building a better financial future, we always talk of the financial resolutions we are taking for the times ahead. We focus on the future but what we don’t realize is that the past might be equally guilty for our not-so-good financial health. So, once for a while, let’s focus on quitting the bad habits, especially those related to money which keeps us away from our financial goals.

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Bad money habits have been injected in our DNA as our daily routines and might seem quite difficult to quit, since they now seem to be the way the things move. But this is not true. Most of these owe their existence to the lack of proper knowledge about personal finance and money management. Irrespective of our best intentions, these money-eating termites continue to derail the train from path of financial success. Here are some of these:

1. Saving for Taxes at Last moment – This is one of the most deadly combinations of the good and the bad. While tax savings is obviously a wiser thing to do, doing it at the very last moment often proves costly. Each tax saving option has its set of pros and cons, but lack of time doesn’t allow weighing these options. E.g. a tax saving FDR has its interest taxable with 5-year lock-in where as PPF Account has a 15-year lock-in period but its interest is exempt. So, planning for taxes should indeed start from the beginning of the year, so that you can take a better decision, or in fact, an informed decision.

2. Saving Just for Sake of Tax Saving – Savings are often made a tax saving strategy instead of linking it to specific goals like planning for retirement, child’s education etc. Some instruments, though not qualifying for tax saving, are indeed much better options in terms of returns and liquidity, but our saving plans linked only with tax fail to appreciate these instruments. E.g. tax free bonds come with much better returns than tax savings FDs with no liquidity restrictions. So, indeed look out for investing linked with specific goals and that goal should not be just tax saving.

3. Living without an Emergency Fund – Majority of the salaried class people often find it hard to quit their job even if they are not finding it interesting. This is due to the fact that they have got habitual of monthly credits in their bank accounts and absence of these credits for a couple of months might affect the finances of an individual and his family. Having an emergency fund helps in this case. It is often prudent to have 6 month’s expenses as emergency fund so as to survive the bad times or to help in times of emergencies. (Also read, Investing in Liquid Funds).

4. Paying Bills without Checking the Statements – People generally make the payments for their credit cards and utilities’ bills without checking the details and often the due date reminder SMS triggers the payment. Credit card companies do sometimes include some charges in the statements and often reverse when the issue is brought into their notice. Also, do check that all the transactions being charged to you have infact been incurred by you and no additional entry makes an appearance in the statement. Similarly, utility companies like telecom etc. fail to transfer all the benefits of the respective tariff plans opted many a times. But when the statement isn’t even opened, how can one keep a check. While this might seem to be a small leakage from our finances, but it must always be remembered that small drops make an ocean. So, next time you pay a bill, do make sure you first check that all the transactions belong to you and all the due benefits have indeed duly transferred.

So, it’s now time to shed off the past mistakes and take a stride towards a better financial future.

Check out the A2Z of Personal Finance here.

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