Financial discipline when maintained throughout can help you achieve your various goals, including the emergency corpus you require in adverse times. Many display that early on and stay on course, but as time goes on, that discipline takes the backseat as bad financial habits kick in. Too much shopping with credit cards and other such habits reduce your emergency corpus significantly. Yes, life comes once and one wants to enjoy every bit of it. But that enjoyment must not make you financially vulnerable later. Remember, an emergency corpus only helps you in case you lose your job, undergo medical treatment later, etc. So, stay away from bad financial habits and keep building your corpus patiently to see off such times should you witness them later.
These Bad Financial Habits Reduce Your Emergency Corpus
Financial advisors suggest saving 10-15% of your income towards the emergency corpus. But saving more than that will only help you effectively deal with inflation years after. However, many follow the lifestyle of their peers and could not accumulate enough to deal with bad times. Let’s check these bad financial habits in detail.
Too Much Shopping with Credit Cards
Using too much purchasing power of credit cards can only backfire on you. Because if you fail to clear the entire dues, which is possible with such shopping, an astonishingly high interest rate of 30-40% per annum will sink you into a deep crisis. So, prioritize your credit card purchases; see which one adds value and discard the ones that are not useful. This way, you can pay off your credit card bills fully and on time, while getting the space to build an emergency corpus.
Taking Unnecessary Loans
Take a loan when you need it and for the purpose that you cannot ignore. Other times, avoid applying for a loan. It helps you create an emergency corpus without any problem. But ‘Rule Breakers’ do the opposite and face financial problems as a result. Loans such as for buying consumer durables are a clear ‘NO’ when you already have other loans. Multiple loans only cause headaches for you despite fulfilling your needs. Let’s reduce your debt count by as much as possible, to breathe free.
Not Comparing Loan Offers
Loans feel good when taken at the least interest rate. But the key is to know the least rate itself. Many think that the rate pitched to them by the bank executives is the lowest. But sometimes, such claims are proved wrong and make customers pay more. As a result, the emergency corpus doesn’t build to a level that you may want. So, why don’t you go online to check the interest rates lenders actually charge on loans? There are many online loan marketplaces allowing you to compare interest rates, processing fees, loan tenure of all lenders. Wishfin, an unbiased financial marketplace with 10 million+ Happy Customers so far, is one such platform for wholesome comparison.
Taking Loans to Invest in Stocks
Investing in stocks adds to your wealth and helps you achieve your various financial goals. But investments should be from your salary and not through a loan. Often people apply for loans to invest. It’s all good when markets continue to climb. They can pay off the loans with investment returns. The moment the market corrects, the payment happens through the salary. Correction, if sustained for long, won’t make you feel good paying your loans. What’s more, you lose focus on emergency corpus creation.