Avoid these 5 silent traps that can kill your wealth
What's the story
Building wealth is the goal of many, but some hidden factors can silently kill your financial health. These wealth killers are often unnoticed until they have caused a lot of damage. Identifying and addressing these issues is critical to keeping your financial assets intact and growing. Here are five silent wealth killers you should eliminate today to secure your financial future.
Inflation
Ignoring inflation's impact
Inflation diminishes the purchasing power of money over time. In other words, what you can buy with ₹100 today will cost you more later. If your investments don't beat inflation, you're actually losing money. It's important to invest in assets that yield returns above the inflation rate to protect and increase your wealth.
Fees
Overlooking small fees
Small fees on investments or bank accounts may appear negligible, but they add up later. A 1% fee on an investment portfolio may not sound like much, but it can greatly reduce returns in the long run. Regularly review all fees associated with your accounts and investments to ensure they're competitive.
Emergency funds
Neglecting emergency funds
An emergency fund serves as a financial safety net during unforeseen events such as a medical emergency or job loss. Without it, you may be compelled to dip into savings or incur debt at exorbitant interest rates, which can derail long-term financial goals. Aim to save three to six months' worth of living expenses in an easily accessible account.
Lifestyle inflation
Lifestyle inflation trap
We all know how, as our income rises, our spending rises too, proportionately. This is called lifestyle inflation, and it prevents you from saving more, even if you are earning more. To avoid this, it's important to keep a budget that focuses on savings and investments, even as your income increases. Such discipline makes sure that rising earnings translate to rising wealth, not spending.
Debt interest
Underestimating debt interest rates
High-interest debt, like credit card balances, can easily get out of hand if not managed properly. Paying just the minimum amount each month leads to massive interest payments over time, without much of a dent in the principal amount owed. Prioritize paying off high-interest debts first, while keeping from racking up new ones, as much as possible.