Top 5 Personal Finance Myths to Overcome – Forbes Consultant in India

It is often among the best feelings in this world when you start earning. With this, your shopping checklist expands, the search for dream vacation websites becomes crammed with your phone, and many very “important” extras. Finally, by chance, the idea of ​​saving comes to your mind. Therefore, if you have won, it is equally important to invest and profit properly.

We all also come across random bits of advice for personal finance and some of which we may have been blindly following. But not all advice is practical. Here are some personal finance myths that should be debunked.

1. Myth: Savings = Money to Keep in a Savings Account

I started saving – just look at the savings balance and fixed deposits (FDs). It is the safest place.


Let’s face it. We keep digging into our bank account for different things – including “important” things like a new mobile phone. Expenses usually eat up whatever is readily available — and your savings account is first.

Even if we’re the rare person who keeps money in FDs, and doesn’t “break” it, is it actually saving? Since inflation is higher than returns, we are actually exchanging any real returns for the ‘safety’. Take, for example, the FD rate of about 5% nowadays and consumer inflation close to 6%, we are eroding our purchasing power.

Thus, it is necessary to bypass a savings account and invest money as a portfolio – from different asset classes, which correspond to your goals and needs.

2. Myth: Retire before 40 is too early


What is retirement? Is it jobless or jobless because you want it, and you don’t need to? And saving is not just about making sure you have the things you might need when you retire, but everything to enable your dreams to come true – whether it’s a dream home, the best education for your kids, or that coveted car. Let time work in your favour – and let your money work as hard as you do.

We often hear that “money begets money” – simply put, savings, in turn, help you save less. Over different periods of investment time, this means dramatically different results. For example, if you decide to invest only INR 5,000 per month at a rate of return of six per cent from the age of 20, it will turn into INR 5 crore at 60. On the other hand, even if you save INR 10,000 per month from the age of 40, you will have Only 4 crore INR on hand for the same age.

What does this mean for your personal money? The sooner you start investing, the more you invest regularly, and consistent returns can have a huge impact on your savings by the time each of your financial goals is reached.

3. Myth: You need a lot of money to invest

I will start investing when I have _____.


So, how much did you fill in the blank?

100 INR

1000 INR

INR 10000

INR 10,00,000

The list goes on but you never invest. Many people have misconceptions that investing requires a large amount of money. Part of this is that investments aren’t usually an area we understand very well. It’s easier to say that we’ll make an effort to understand and do it well when we have a “big” amount of money. Hence this procrastination, which usually ends with impulsive decisions made later.

There is no real “minimum amount” where it suddenly makes sense to start investing. It’s best to think of personal financial management as part of your life outlook – to ensure that you regularly invest part of your income to achieve long-term dreams and part of your overall financial discipline. And with digitization, even if you are just starting out, there are plenty of options to choose from.

4. Myth: Risk is risky, it is only savings

Investments are risky. You can lose all your money.


As humans, we have a natural tendency to fear the unknown. Investments are usually just such an area. We often exaggerate and retell the stories we hear about lost fortunes. It’s interesting, as is so often the case, that we dread getting lost when we hear about big investors like Warren Buffett. The key to addressing this is to remember what Morgan Housen says in his book The Psychology of Money, “You pay for everything, nothing is free.”

Likewise, if we want our money to work hard – we need to make the effort to understand what the risk is, what is the reward associated with the risk, and then design a portfolio that is comfortable for us.

The first thing to understand is that stock markets are not the only way to invest. The next fact, of course, is that there are experts present to help find the right opportunities. Doing nothing is not an option.

They will help us plan things smartly, one of which is risk reduction. To reduce investment risk, you can invest your money in multiple locations. Diversity in investment areas will save you from market risk – not putting all our eggs in the same basket. Diversification can also begin at different points in life.

When you’re in your twenties and your appetite for risk is relatively high, for example, it’s a good idea to focus on higher-return equity investments: as you get older, you can gradually diversify away from equity to give equal weight to debt financing, mitigating risk while you are Where this is a major priority.

5. Myth – I don’t need emergency cash

If you’re earning a stable monthly salary or income and already have a healthy savings portfolio from FDs to MFs to retirement savings, you might think you’re all set, especially if you’ve invested in insurance as well. Many people in this situation subscribe to the myth that you don’t need to access emergency savings.


This is far from the truth. Emergencies by definition require that you have resources on hand to address them. What if you get injured while on vacation in a country that doesn’t have health insurance (seriously, take cover when you go on vacation!)? Or, as many salaried employees with stable jobs have realized, what if a global pandemic pushes the economy into recession and forces well-performing companies to start cuts and redundancy rounds?

No matter how many scenarios you insure on, it is critical to be in a liquid cash flow position throughout the month, and to have instant access to liquid assets like gold to see you through any Black Swan events in your career or the economy as a whole.


You may not be an economist, but you can plan a little in advance. Make baskets for bills, investments, and savings, and spend accordingly.

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