You’ve probably heard of one person, the winners of Kaun Banega Crorepati (KBC). He
famously won ₹5 crore on the show—a life-changing amount for most people. After
taxes, his winnings came down to around ₹3.5 crore.
Sounds like a dream come true,
right?
Unfortunately, this dream took a
turn for the worse. Over the years, Sushil Kumar faced severe financial
difficulties and eventually went bankrupt. One major reason? He lacked the
knowledge and strategy needed to manage and grow his wealth.
To put this in perspective: if he
had simply invested his after-tax winnings in an index fund around 2010-2011,
that amount could have grown to over ₹10 crore by 2022. His story is a stark
reminder that having money is not enough—knowing what to do with it is
critical.
So, let’s explore 4 common
financial mistakes that many salaried individuals make and how you can
avoid them.
1.
Underestimating the Power of Inflation
A major financial blind spot is not
understanding how inflation erodes the value of money over time. In the US, the
dollar has lost about 96% of its purchasing power since inception.
In India, assuming an average
inflation rate of 7%, here’s how ₹1 crore depreciates over time:
- In 10 years: worth ₹50 lakhs
- In 15 years: worth ₹36 lakhs
- In 20 years: worth only ₹25 lakhs
The key takeaway? Growing your
money isn’t just about high returns—it’s about outpacing inflation. Many
are swayed by mutual fund advertisements promising 15% CAGR returns, but
without a strategy aligned with inflation, long-term wealth creation can fall
flat.
2.
Delaying Insurance Purchases
Another big mistake is not buying
insurance early. Let's look at some numbers:
Medical inflation in India is
currently around 14%, which is even higher than the US inflation rate.
Additionally, the premiums for health insurance are rising rapidly every year.
What happens when you delay? The
cost of term insurance purchased at age 35 is almost 70% higher than if
it were bought at 25. Plus, we’ve all seen the financial stress caused by
medical emergencies—especially during the COVID crisis in 2020.
Start early. A small insurance
premium now could save you lakhs in the future—and protect your family.
3.
Ignoring Fixed Deposits as a Financial Tool
Many dismiss fixed deposits (FDs)
as outdated, but they still hold significant value in financial planning.
FDs serve two major purposes:
- Emergency fund:
You should ideally have 6–12 months of your income saved. FDs or liquid
debt funds are great vehicles for this.
- Opportunity fund:
When markets crashed in 2020, those with liquid savings were able to
invest at low prices and reap great returns.
The bottom line: While FDs might not
give the highest returns, they offer liquidity and stability, which can
be crucial during uncertain times.
4.
Avoiding Non-Paper Assets
Salaried individuals often focus
only on paper assets like stocks, mutual funds, or fixed deposits. But
there’s another category: non-paper assets, which includes real
estate, land, physical gold, and even digital assets like Bitcoin.
Why are non-paper assets important?
Because they offer protection against inflation and currency devaluation.
For example, during massive money printing by governments—like the US
increasing its money supply by 300% between 2000 and 2022—paper money loses
value fast.
Real assets like land and gold
retain their value and are less impacted by policy changes or financial system
risks. They are a great hedge in uncertain times.
Final
Thoughts
Managing your money isn’t just about
choosing the right mutual fund or the hottest stock—it’s about building a balanced
and resilient financial strategy. Avoiding these four common mistakes can
help salaried individuals like you protect your future and build real wealth.
Start early. Plan wisely. And
remember—it’s not how much you earn, but how well you manage it that
truly matters.
DISCLAIMER
Airfinac.com, its author/writer and associates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.