“Financial Lies” that we tell ourselves

Written by Vidya Kumar

July 16, 2015

EXECUTIVE SUMMARY:  We promise to save money at the end of month – this is one of the biggest lie in the financial world. There are many who fool themselves by saying they can’t afford to save money. If this is true then they are making their path difficult towards financial success. Also there are many lies related to retirement, investment and insurance which people tell themselves and make their own life difficult. 
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When it comes to personal finance we ask questions and discuss our queries with friends, relatives, etc. However, we don’t discuss much with an expert. Right? Do we lie with our finances? Do we handle our personal finance in a systematic way? Are we able to keep a proper track record of insurance, investments, savings, expenditure, etc.? While trying to make ourselves feel better we often lie to ourselves and console our minds about things that we may do in the future. Here are the few common financial lies that we tell ourselves:

  • It is too early to plan for retirement: It is well said that one should start planning for retirement as soon as they start earning. It is a common tendency to ignore events that may occur after a long time. Retirement is one of them. Many people perceive that retirement may not require a lot of money. However, retirement is the only time when a large portion of one’s savings is used because there can be medical expenses, vacation, day to day expenses etc. Some people fail to realize that their capacity of generating the maximum amount of income and save for their retirement is only during their young age and not during the old age. Most of the people think that they genuinely love their work and they will continue working but they should realize that physically they may not able to do it. Hence, considering the fact that we are all human beings and we are subjected to our health we should start saving for our retirement and stop assuming that we can work forever. Huge amount of health expenses along with the physical inability to work may change one’s lifestyle. Therefore, it is advisable to put a minute amount of one’s savings into retirement planning every month and the same can be invested which may fetch a quite a high return provided that the investments are done properly.
  • Investments are too risky and complicated for me: Some people find investments too risky as they may not understand the terminologies and various other financial products. Hence they avoid investing. Whenever mutual funds are mentioned one doesn’t want to go ahead with it. Not all mutual funds are bad, and there are different varieties of equity, debt, gold etc. No one realizes that not investing is much of a bigger risk as one keeps loosing purchasing power with the idle money kept in the bank account. An investment portfolio consists of various levels of risk and return potential and one has to just decide the amount of risk one is willing to take and accordingly select the product. A investment advisor or a financial planner can help get clarity of the long- term and short-term goals according to which decision of investments can be taken.L


  • I can borrow from my emergency fund and pay it back later: Savings are always kept in the bank account to encash the emergencies that may occur at any point of time. This can be a logical decision taken back then. But how often does one fill back their emergency fund if used? Most of the time one use the emergency fund to buy unwanted things and do not fill it back. This way they loses the interest amount that could have been earned through savings account. If one has to change their lifestyle in order to get back the savings, then it is worth giving up on some small items and save. Also, it is very important to maintain the track of annual expenses. 
  • Term Insurance is a waste of money: Term insurance is one such product which does not give anything in return but it does ensure the need of protection of an individual or one’s family. Indians normally have the tendency to get something in return if they have invested in monetary terms. This is one kind of product which should be definitely bought because one doesn’t know when a lump-sum amount would be needed on the death of the main person who must be earning. 
  • I have landed into debt and there is no other way to get out of it: In today’s world, resisting the temptation to spend for a few things that we may want is very rare. Hence many people fall into debt convincing themselves that they will somehow manage it. But this kind of decision wherein one doesn’t think about the consequences, leads to nowhere but financial crisis. That is how one starts thinking that they will never be able to get out of debt. This is not a situation to feel powerless. Handling debt expenses can just be dealt by paying off the debt amount with the highest interest rate if possible or else, or paying off the smallest balance of debt , thus closing it quickly and moving on to next one. When the debt amount is cleared, it gradually makes one feel secured and peaceful about their finances and can then tart saving for the future.

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