Many have a perception that there is a base monetary requirement for happiness. But many don't end up happy after spending a big chunk of money.
Here are five situations on how the quest for happiness could translate into a financial mess, and solutions:
MATERIAL WORLD
What was a luxury earlier is becoming aneed for many individuals today. For example, a new designer watch, attire, imported perfumes, swanky car. multi-storyed house and so on. Where does all this end? In most cases, the person ends up piling different loans and serving huge equated monthly instalments (EMI) On an average, one's EMI outflow should not exceed 30-40 per cent of net earnings. However, it is often seen that a person takes a higher liability than he or she can bear. Recent recessionary trends proved an eye-opener in many ways for those neck-deep in loan liabilities, with salary cuts and job losses.
It is prudent to assess the financial feasibility before committing to high value purchases, to ensure one does not end in distress. If it is beyond manageable limits, evaluate means of cutting your loans and spending habits. Prioritise your personal and financial goals over luxuries.
BIG BUCKS OVERNIGHT
Rome was not built in a day goes the popular saying. It applied to the growth in your wealth too. Picking penny stocks and indulging in derivatives are common errors in setting out to make big bucks. In 2008, when the capital market meltdown happened, many lost big sums, a lot of which they have not recovered till date.
Investments should be made patiently and discreetly. There is no point putting your money on hot tips. Try to diversify and use systematic investments. It will take a lot of pressure off your back.
NON-REGULATED INVESTMENT
A huge population in India dig chit funds big time, with a view to making quick bucks, given the 'guaranteed' returns from such avenues. It is always a smart decision to stick to regulated avenues. At least, there would be a grievance cell and governance bodies to look into your issues and there would be escalation processes to enable one to fight back and try to fix the problem at hand.
Investments need to be done keeping in mind your risk profile. There will always be products advertising attractive returns but they could have huge risks. Investors only lose money in such investments.
FALLING PREY TO MIS-SELLING
We never really bother to crosscheck the tall claims that a sales person makes. You couldn't have possibly missed at least one such call that says: 'invest for 3 years and double your money' or 'this plan will give you 30 per cent returns.' Always cross-verify on the internet or with knowledgeable friends. Sales persons tend to give you one side of the story, the positives, often exaggerated, but not the downsides – risk, returns, term and commitment.
IINVEST WHERE MY HEART IS
Some investors believe only in investing in equities. There are others who wish to stay a mile away from such avenues. A cup of coffee is not enjoyable if it is either too hot or too cold. There is a balance to be struck even in mundane things.
Investment is not a matter of emotions. This decision has more to do with your brain and little to do with what your heart has to say. Keep aside your sentiments while investing and create the right mix of debt-equity. This is, in fact, the key to optimisation of returns.
Don't make an emotional investment. A rational decision on investments is likely to turn out your best investment. Take professional advice if time does not permit you to personally evaluate and track your investments. Use an advisor, who can assist you to track your investments and take your headache away.
Happiness (for the heart) can be achieved in small ways and some can be achieved at a low cost. You can always plan a short vacation, make gifting a habit, take your loved ones for dinners, say it with flowers. These small surprises give more happiness than what can be quantified by money.
CONCLUSION
Financial mess is inevitable unless one treads with care at all times. Such pitfalls can be conveniently avoided if one stays alert and makes the right decisions, backed by ample awareness.
RULES OF THE GAME:
Keep a check on loans. Don't buy everything on credit cards
Nothing happens overnight – your money, too, will not grow exponentially in the short term
Disciplined long-term investments will prove valuable
Track your investments regularly to ensure that you are abreast with the growth/loss
Avoid investing in avenues that promise great returns, but are unregulated
Don't rely on the investment advisor. Do your research and gain ample knowledge
Emotions should not be a part of your decision-making process
Be happy with small gains
