It is so true that the earlier you understand the ins and outs of money, the better equipped you’ll be to manage your finances down the road. Who doesn’t want to be confident and successful with their money? The good news is that it’s never too late to start learning about finance.

Most people in India struggle to manage their funds correctly. This has something to do with their spending and lifestyle choices. A recent survey by the Reserve Bank of India (RBI) found that only 27% of Indians are financially literate, significantly lower than the global average of 33%. Getting the basics right makes managing your finances much easier. Therefore, in this blog, we will examine the financial mistakes that you shouldn’t commit or stay away from.

KEY TAKEAWAYS

• Ignoring inflation is a pervasive error in India, eroding wealth silently over time, particularly during high-inflation periods.
• Over-reliance on traditional savings like bank FDs, which often barely match inflation rates, stunts real financial growth.
• Underestimating future living costs due to inflation leads to shortfalls in retirement savings and other long-term goals.
• Postponing investment decisions compounds the inflation problem, as the impact grows exponentially over time, severely diminishing wealth.

Common Financial Mistakes in India

“Financial freedom is available to those who learn about it and work for it.” Suze Orman, New York Times best-selling author on personal finance, said, and she couldn’t have been more right.

Let’s take a look at some of the common mistakes Indians make with their finances and how you can avoid them.

Lack of Budgeting

If you’re finding yourself in a tough financial situation, where you’re not bringing in enough money to cover your expenses or you’re constantly overspending, it’s important to take a step back and reassess your financial habits. This is where budgeting comes in. By spending less and creating a plan to save money for the future, you can learn financial discipline in the long run. Never spend more than you earn, regardless of your income. If you do need to seek credit, be sure to manage it properly to avoid falling into a dangerous debt trap.

How to make a budget plan in three simple steps?

• Maintain a record of your income.
• Track your expenses.
• Make sure that your budget is in balance.
• Expense Tracking

If we are talking about budgeting, we can’t miss out on the third point of budget planning, which is expense tracking. Keeping a daily record of your spending, including receipts, invoices, and other outgoing expenses, improves the financial health of your budget. Tracking expenses can help you manage your financial flow and taxes. Knowing where your money goes allows you to make better decisions, budget, and save more. It assists with debt management, financial planning, and preparing for emergencies.

Delaying Investments

People frequently postpone their investing decisions from one day to the next, assuming that it makes no impact. However, by delaying the time at which you invest your money, you are postponing your chances of earning a profit. It is probable that, as a result of this, your capacity to achieve your financial goals, such as starting a business or saving for retirement, will be limited. This may lead to the loss of chances and potential gains.

Ignoring Inflation

Ignoring inflation is a common practice in India. Before the issue arises, people hardly ever discuss or consider it. When making investments, you should always consider inflation. It erodes the value of your investment over time. To beat inflation, you must invest in options capable of producing inflation-beating returns. Investing in mutual funds and stock markets is the most effective approach to combating it. If you haven’t included inflation in your investments, they may not be meeting your objectives.

Retirement Planning

Only 33% of working Indians are actively saving for retirement, according to a survey by HSBC Bank. This means that a staggering 67% of the working population is not actively preparing for their post-work years. This is one of the most common problems India is facing when it comes to financial stability.

Everyone who makes money should make retirement planning a top priority. Why rely on others when you can support yourself? Individuals can regularly save for retirement via a variety of strategies. If you want to plan your retirement properly, consider investing in mutual funds, NPS, PPF, and VPF. You will not experience difficulties with finances since you save a small amount of money each month. Check out the list below of investment plans for monthly income.

Investment Plans for Monthly Income

• Senior Citizen Saving Scheme
• Post Office Monthly Income Scheme
• Pradhan Mantri Vaya Vandana Yojana
• Fixed deposits
• Mutual funds
• Annuity plans
• Systematic withdrawal plans
• Corporate deposits
• Monthly income plans
• Dividend income
• Equity share dividends

Over-reliance on Physical Savings

A common financial mistake many people make is relying too heavily on physical cash savings. While keeping some cash on hand for emergencies is smart, stashing large amounts under the mattress or in a personal safe is risky. Cash can be lost, stolen, or destroyed, and it doesn’t grow in value. More importantly, this habit often stems from a mistrust of digital banking, leading people to miss out on the safety, accessibility, and growth potential of digital savings.

By avoiding digital savings, many inadvertently expose themselves to greater financial risk and miss opportunities to build long-term wealth. It’s a critical error that can significantly hinder one’s financial security and growth.

Debt Management Issues

Debt finance is a powerful tool for development, but it’s important to manage it responsibly. Unfortunately, individuals and governments alike can sometimes struggle with this. When individuals don’t pay attention to their debts, it can lead to a vicious cycle of owing more and more money. This can have serious consequences not only for their personal finances but also for their credit scores and future borrowing ability.

Under-insurance or Lack of Proper Insurance Coverage

Insurance coverage will not stop all of life’s disasters, but it will make the financial effects more bearable. However, the tendency of people to be ignorant about insurance coverage is quite evident. Losing an insurance policy has severe consequences for the subject and can take a heavy toll on one’s or a company’s financial condition. For individuals, dealing with heavy hospital bills can be draining. Similarly, small companies that lack sufficient insurance or coverage could run into financial problems or even bankruptcy if they fail to adequately protect themselves from a number of risks and liabilities.

Wrapping it Up!

With people in the country constantly gaining an understanding of the concept of financial literacy, it has never been more important to make intelligent money choices. Here are some proven ways to get your finances right, as the illusion of the “more money, the merrier” mantra fades quickly. The pursuit of money tends to overlook these financial blunders or mistakes, but with positive changes in the nation’s financial behavior, it is possible to achieve every Indian’s dream of a financially secure future.
At Peak72, we are excited to teach you everything you need to know about banking and budgeting, saving and credit, and even debt and investing. We have articles, frequently asked questions, and videos to help you create a solid foundation for your future financial life.

Must read books for financial Knowledge

• Rich Dad Poor Dad by Robert T. Kiyosaki
• What to Do with Your Money When Crisis Hits: A Survival Guide by Michelle Singletary
• The Silk Roads: A New History of the World by Peter Frankopan
• The Basics of Bitcoins and Blockchains by Antony Lewis
• A Random Walk Down Wall Street by Burton G. Malkiel