India is the world’s fastest-growing large economy, having outpaced China over the past year. At the same time, the population is growing rapidly. By 2022, India’s population will have overtaken China’s to become the largest in the world. The great Indian middle class see how they make financial mistakes.
The middle class is growing at breakneck speed and will one day overtake the rest of the world too. According to NCAER, India’s middle-class population would be 267 million in 2016. Further ahead, by 2025-26 the number of middle-class households in India is likely to more than double from the 2015-16 levels to 113.8 million households or 547 million individuals.
The middle class provides and consumes the bulk of services that keep society afloat, driving economic growth and investment with each purchase they make. But when it comes to money, the American middle class faces a range of unique challenges. Wages are not catching up with the inflation rate, poor health care, less opportunity etc. But. Not all the money woes are economic issues. We don’t always make the smart decisions when it comes to money. Here are the money mistakes that middle class needs to stop making to turn around things.
Racking up too much debt
The middle-class people have to work very hard to meet their monthly budget of groceries and other essentials. This left them with almost zero savings. Secondly, they are the service class people who get loans easily. They are trying to get ahead financially and tend to take more debt like a credit card, personal loan, mortgage loan etc.
Not having an emergency fund
As stated above they are hardly meeting their basic needs which left them with zero saving. The family should have at least 3-6 months of expenses as an emergency fund. When you don’t have the cash to cover emergencies — which will inevitably occur — it’s far easier to let your finances spin out of control or get caught in a cycle of debt. With some cash stored “out of sight and out of mind,” you’ll have a buffer should you face surprise medical bills, home or car repair costs, or other expenses you couldn’t predict.
Not saving for retirement
Retire on time requires patience, persistence to invest steadily. If you want enough corpus at retirement, you need to boost your investment as your income grows. Fix up a percentage of your income that should go into a retirement fund. This way your retirement contributions will increase automatically as your earnings grow. Simultaneously it will not burden you as it will be in a proposition of your income.
Delaying retirement saving
A frequent middle-class mistake is to delay saving for retirement while focusing on other financial priorities first. For many of us, it’s far too easy to believe you’ll start saving for retirement after you pay off your student loans, buy a house, or fund your children’s college education. While these are all worthy goals, life happens, and it’s easy to put retirement savings on the back burner until it’s too late. A small amount saved consistently takes advantage of compound interest and can have a significant impact at retirement. Start small but steady and increase your retirement saving over a period of time.
Forgetting to update nomination
Do you want to gift your hard earn money to the government? This is the type of thing that happens when you don’t update beneficiary changes and you pass away. Marriage, having children and other such occasions are the reason you need to revisit your nominations. The beneficiary designation form is a legally binding document and overrides your will. Therefore, whoever is named on the form will receive the asset over what your current will reads. And when these documents aren’t updated, huge sums of money can wind up in the wrong hands.
Spending too much on depreciating assets
As I mentioned above middle class trying to get ahead financially and purchase assets which are sometimes not required. Indian are purchasing a car and other shiny stuffs which are “sunk cost” I call it emotional purchase which should be avoided.
Are you feeling guilty? Which of the mistake you are making?
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