Do you make these dumb financial mistakes?

Every now and then we do dumb things, after all to err is human. But making dumb mistakes when it comes to financial matters can turn out to be costly. We could make these mistakes either due to ignorance, laziness or naivety. Whatever the reason, ensure the next time you handle your money, you don’t make these mistakes.

Signing at the X mark: How many times has this happened to you? An insurance agent, or a broker, or a banker telling you, “I will fill the form for you sir, you just sign wherever marked X.” And looking at the size of the form and thinking of the tedious process of filling those boxes, you simply agree. Taking this path of least resistance is nothing but a dumb mistake. (Let’s not pretend we haven’t done this before).

[caption id=“attachment_496308” align=“alignleft” width=“380”]  If you are looking for a home loan and your marital status is incorrect, it could effect your loan eligibility.[/caption]

Allowing someone else to fill your form can easily lead to errors on your form. A misspelt spouse’s name in a life insurance policy means nothing but torture to your spouse, when you go up there. Can you imagine what a tedious process she might have to go through, after you are not around to get that life insurance claim. If the agent fills an incorrect date of birth on a medical insurance form, it might affect the kind of premiums you pay and also policy claims. Now if you are looking for a home loan and your marital status is incorrect, it could effect your loan eligibility.

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Of course, all these errors can be rectified later, but that’s again a hassle, so it’s best to be smart and not just sign the X mark, but fill the form on your own.

Small amounts = Big debt: Possibly the dumbest mistake you make is related to the devil which comes in a size of 3x2 inches, a.k.a the credit card. Ideally, you should get rid of the total amount due on your card. But let’s be honest, at times you might be short of cash and you only pay the minimum amount due. Doing so once in a blue moon is okay, getting into the habit of paying only minimum amount due and rolling over credit to another month is like giving an open invitation to the devil of debt.

The minimum due is usually only a small part of the total amount due, for instance 5% and paying only that amount is outright stupid. Let’s take a look at terms and conditions of a foreign bank’s credit card: Making only the minimum amount payment every month would result in the repayment stretching until the entire outstanding is settled and consequent payment on your outstanding balance during this extended period. For example, if payment due is Rs 5,000 and you do not make any new transactions on your credit card, the payment will stretch to 6.5 years (77 months). So unless you want to be stuck with a never ending debt trap, pay more than the minimum amount due.

Dead but around: Laziness, and only laziness, is the reason behind this mistake. Keeping a relationship with accounts, products and service active even when you no longer use and need them, is dumb.

This could be savings account that lies dormant due to no transactions or subscriptions for magazines or club and gym membership active even when you no longer use them. As far as unused accounts go, they can be used for fraudulent activities by fraudsters, not to mention you earn only a small amount of interest for these funds compared with parking money in other financial instruments like liquid funds.

It just takes a visit to the branch to close the account. At times, you allow an auto-renew facility for magazine subscriptions, gym membership on your credit card and have no clue that you are being charged year after year. If you are not someone who reads the credit card statement regularly, this could dig an absolutely avoidable hole in your pocket. Are you sure, you don’t have any auto-renewals on your cards? If not, just call the banks call centre and get it fixed.

There are many more dumb financial mistakes we all make. These are just a few. Psychologist says that when your To-do list has more than five items, things never get done. Hence, we stuck with three as of now, deal with these three at a time, get them in your system and keep tracking this space for more obvious mistakes you could avoid.