1.Emotional goals and responsibilities:
Every financial advice includes a tip to spend less and cut down the unnecessary expenditures. Spend less on holidays and trips, cut down the shopping list, avoid buying vehicles and other gadgets on EMI and many more advice. But no one tells you how. While we studied keenly on why none of the advice work, we observed that every person, who is earning, have some emotional goals and responsibilities. Spending on things that makes his/her family happy becomes the primary goal. Spending on dinner at restaurants or holiday with a family is rejuvenating, spending on better clothes and gadgets is a part of self-esteem and buying on EMI and credit card is to fulfil immediate needs of the family which they believe is helping to build a better future.
2.Education loan debts:
With rising cost of education, people are struggling to balance between providing good education to children and manage financial acumen.”71% of parents in India are willing to get into debt to fund their child’s higher education”, says one of the reports published in 2017 in the Economic Times. While there is no getting back from the responsibility of funding child’s education, most of the parents who are unaware of higher education costs, opt to borrow money from banks, finance institutes or P2P lending. It gets tougher to avoid loans at such situations.
3.The standard of living(Social status):
This is a dangerous habit that doesn’t let people achieve financial freedom. While, having a high standard of living is definitely a good thing, faking the high standard of living because of social status, will get you in trouble. Everyone has a misconception about the financial status of other people. They think everyone else is living a happy life with financial life sorted, while they are struggling with finances. Whereas, in reality, people have their own junks to handle. Once the fake high standards are set, people are afraid to let the world know about financial status and continue to live lavishly in spite of heavy debts with the edge of bankruptcy.
4.Inconsistent financial planning:
Everyone gets excited by the word, Financial Freedom. They start implementing every idea they hear or read, in order to achieve quick financial freedom. Amidst all this juggle, people fail to realize that, consistency is the key. Everyone has a different level of income and can only afford the goals according to personal finance. Buying a new car just because your neighbor got one, isn’t going to help you if you are saving towards a goal to buy a new house. Prioritizing a financial goal, validating its possibility and sticking to it with consistent savings is important. People start saving and as time fades, they divert attention towards short-term goals while they forget the importance of long-term goals that they have set.
While all the points mentioned above are path holes for successful financial freedom, we realize that it is lack of appropriate financial literacy and lack of consistent review of financial goals, that masks the importance of financial planning. ChintaMoney is a Fin-Tech startup, aiming to make India financially literate, strong and Independent. The app helps you transfer money instantly, track expenses, set both short term and long term goals and help you learn more about personal finance and investments.