4 Financial Mistakes You Will Regret at 50

Been my jogging companion since 3 months now, Sharma Uncle has been an inspiration for me. Considering his age, Fitness Guru is what I should call him. At 60, he can still jog one more round of town park when I take rest. Sharma Uncle retired just 4 months back as Branch Manager in a bank in Mumbai and then got back to Delhi to live with his son and daughter-on-law, Rohit and Pooja, our neighbours. A Sunday morning and a light drizzle, the amazing combination seduced us to enjoy the weather a bit more and we sat on the bench after we were done with our jogging. Being a banker, Sharma uncle used to like talking about finance and savings and this morning was no different. However, today Sharma Uncle were in a different mood today. He told me to value my time and money as neither of them stays on our sides for long. He shared with me a little of his financial wisdom, as if he wished to undo certain financial mistakes he thought he made in his life:

Not Starting to Save Early

This seemed to be his biggest regret, and he really pushed me ahead to start saving from early stages of my career. Even though I have been saving a little, he easily convinced me to increase my monthly savings from that level. His one example did that wonders. He simply explained that Rs. 5,000 saved per month at a conservative return of 10% grows to Rs. 1.91 crores at the retirement age if I start at the age of 25, but becomes only Rs. 0.94 crores if I start 10 years later. So, starting to save early helps me be a Crorepati by 50.

Not Saving Right

Being a banker, Sharma Uncle’s savings were mostly invested in fixed deposits in the same bank. After all, he got 1% extra return on the deposits, being a staff member. However, had he known the power of equities, his corpus would have been substantially large. He was just quoting an example of his own friend who had invested Rs. 0.05 crores in their own bank’s equity share around 16 years back would have got converted into Rs. 1.23 crores plus periodical dividends, while Sharma Uncle could get Rs, 0.22 crores in that time while keeping the deposits in the same bank. This is the power of equity over the long run and Sharma Uncle’s story was really an eye opener for me. Of course, mutual funds provide a low-risk option to invest in the markets.

Getting Registered for Dubious Schemes

In the search of easy money after retirement, Sharma Uncle also shared with me one financial blunder he committed to ensure regular flows of money without any work. All he did was to enrol for one multi-level marketing company by paying some deposit. Not only did he invest money, but most preciously his time as well in getting trained to enhance the network. A couple of months later, Sharma Uncle heard no news about the company and the calls to all the trainers went unattended. The only lesson learnt from this episode was that there is nothing like free lunch in this world. The loss of money could still be negated but wastage of time is indeed a criminal wastage.

Limiting the Use of Debt

In an era of easy access to credit cards, it allows access to more funds than what our earnings are. While this not only results in additional spending, it more importantly restricts the ability to save and in fact, is a dangerous savings-eater. Sharma Uncle shared how he had to once prematurely dip into his Provident Fund balance to get out of the vicious circle of credit card payments. Hence, he felt that credit card should be judiciously used.

The lovely weather was indeed turning out to be a game changer for me in terms of financial gyan I was getting. But just then, the drizzle started getting heavier. So, it was time for us to jog, and in fact towards our respective houses, but sooner than later did I realise that I need to jog towards a better financial future by avoiding the four mistakes of Sharma Uncle’s life.

Simardeep Singh is a Chartered Accountant based in Delhi. He loves sharing his knowledge about personal finance and investment. He blogs regularly at  www.simardeep.com.