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These 9 Common Money Mistakes Are Eating Your Income
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Chartered Accountant Nitin Kaushik suggested paying full credit card bills monthly and buying a house with EMIs under 30% of income to build wealth over 10-20 years
By avoiding these nine pitfalls, individuals can start saving money effectively. (Representative/Shutterstock)
In a wave of recent layoffs, major corporations such as Amazon, Google, Microsoft, and Apple have terminated thousands of employees, creating an atmosphere of job insecurity. This situation is particularly concerning for those who are the sole earners in their families, as managing household expenses on a single salary has become precarious.
Many individuals find their entire income consumed by household expenses, and even those with salaries of Rs 1 lakh or more often end up with empty pockets by month’s end.
Chartered Accountant Nitin Kaushik has identified nine common mistakes that significantly drain earnings, which he shared on social media.
Insurance Is Not Investment
The first and most significant mistake is treating insurance as an investment. People often purchase endowment plans or whole life policies, expecting both returns and protection. However, these options do not provide adequate returns or protection.
Instead, opting for a simple term insurance policy that offers coverage between Rs 50 lakh and Rs 2 crore for just Rs 500-1,000 per month and investing the remainder in mutual funds is advisable. Over 10-20 years, this money can grow substantially.
Co-Signing A Loan
The second mistake is co-signing a loan for a friend or relative. While trust may lead one to co-sign, missed payments by the borrower can negatively impact the co-signer’s credit score and make future loans more expensive. It is crucial to thoroughly evaluate before agreeing to co-sign any loan.
Paying Just The Minimum On Credit Cards
Another perilous habit is paying only the minimum amount due on credit cards. This practice incurs annual interest rates of 36-40 percent, turning a Rs 50,000 bill into over Rs 100,000 within two years. It is imperative to either pay the full bill or avoid using the card to avoid debt entrapment.
Investing Without Proper Knowledge
The fourth mistake is investing without comprehension. Whether it is in cryptocurrency, NFTs, or any guaranteed scheme recommended by a friend, if one cannot explain the investment in a single sentence, it is wise to steer clear.
Lifestyle Inflation
Increasing expenses immediately after a salary increment is another common error, known as lifestyle inflation. For instance, earning Rs 2 lakh and spending it all on luxury items like cars, phones, and dining out is detrimental.
Instead, investing Rs 1 lakh in mutual funds can potentially grow to Rs 10 lakh over 20 years. Wealth accumulation is tied to saving and investing, not merely earning.
Purchasing A New Car On Loan
The sixth mistake involves buying a new car on loan. A car’s value depreciates by 20 percent once driven out of the showroom, coupled with 5-7 years of EMI payments. Purchasing a car with cash or opting for a second-hand or smaller car is more prudent.
Putting All Money In A Single Investment
The seventh mistake is concentrating all money in a single investment. Diversification is key to mitigating risk, hence spreading investments across shares, mutual funds, gold bonds, and other assets is essential.
Opting For An Oversized Home Loan
Taking out a large home loan that consumes half of one’s salary in EMIs is the eighth error. This scenario restricts job mobility and the ability to relocate. Keeping EMIs below 25-30 percent of the salary and avoiding hefty home loans is recommended.
Taking Instant Loans
The ninth and most detrimental habit is taking payday or instant loans with exorbitant interest rates of 40-50 percent annually. Planning a budget and maintaining an emergency fund can avoid future financial ruin.
Adhering to the 50-30-20 rule, which allocates 50 percent to needs, 30 percent to entertainment, and 20 percent to savings, is beneficial.
By avoiding these nine pitfalls, individuals can start saving money effectively. Consistently paying the full credit card bill each month and purchasing a house only when financially stable with an EMI below 30 percent will contribute to wealth accumulation over 10-20 years, with minimal effort. While earning money is straightforward, saving and growing it is increasingly challenging.
November 15, 2025, 17:10 IST
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