Browse Category: Financial Planning

6 Money Red Flags in Relationships

After spending years as a finance lover and watching my own relationship survive some serious money struggles, I’ve learned to spot those financial warning signs that can sink even the strongest couples. Let’s have a look:

financial red flags in an relationship

The Secret Money Stasher

Do you know what’s scarier than finding mysterious texts on your partner’s phone? Finding mysterious credit card statements they’ve been hiding. I remember a client who discovered her husband had a secret credit card with $15,000 in debt. The money hurt, but the broken trust hurt more. Secret accounts, hidden purchases, or “forgotten” debt aren’t just financial issues, they’re trust issues wrapped in dollar signs.

The Financial Dependents

Let me be clear: supporting your partner through tough times isn’t a red flag. The red flag waves when they’re completely comfortable letting you carry the financial burden indefinitely while making zero effort to contribute. I’ve watched my friend drain his savings supporting a partner who always had excuses about why they couldn’t work or help with expenses. Three years later, he’s still recovering financially.

The Money Control Freak

This one’s particularly nasty because it often masquerades as “being good with money.” But there’s a world of difference between being financially responsible and financially controlling. When your partner monitors every penny you spend, demands receipts for agreed-upon personal expenses, or makes you feel guilty for buying basic necessities, that’s not budgeting, that’s financial abuse.

The Forever Children

They’re 35 with a steady job but still asking their parents to pay their phone bill. Or maybe they’re bouncing from job to job, always with big dreams but zero plans. Look, we all grow at different paces, but someone who consistently avoids financial responsibility isn’t just immature but someone showing you exactly what your shared financial future might look like.

The Lifestyle Inflator

These folks are scariest because they often seem successful on the surface. But as soon they get a raise, they immediately upgrade their car. Bonus at work? Time for a fancier apartment. 

The problem isn’t treating yourself – it’s the pattern of increasing expenses to match (or exceed) every income increase, leaving no room for savings or financial security. I’ve seen couples with combined six-figure incomes living paycheck to paycheck because of this mindset.

The Financial Ghost

This person completely checks out of money conversations. They don’t want to talk about budgets, don’t know their credit score, and couldn’t tell you how much they spend on groceries if their life depended on it. 

Financial avoidance might seem less harmful than other red flags, but try merging your life with someone who refuses to engage with money decisions. It’s like trying to drive a car while your copilot insists on wearing a blindfold.

The Thing About Red Flags

Money behaviors rarely exist in isolation. They’re usually symptoms of deeper issues like fear, control, avoidance, or past trauma. And here’s something I learned, these patterns don’t magically disappear when you move in together or get married. In fact, they usually get worse under pressure.

What To Do If You Spot These Red Flags

First, take a deep breath. One financial hiccup doesn’t make a red flag, and even serious money issues can be worked through if both partners are willing. Have an honest conversation about your observations and concerns. If your partner is defensive or unwilling to acknowledge the issue, that’s actually a second red flag waving at you.

If you are not sure about the person then give yourself and your relationship time to understand each other. If you are looking for a person and planning to go on a date, then cover the Romantic Ideas That Won’t Break the Bank, as it doesn’t always have to be expensive to be a great date.

Consider working with a financial therapist or counselor who can help unpack the emotional baggage around money. Sometimes, what looks like financial irresponsibility really can be fixed with education and support.

Don’t let love blind you to red flags that could undermine your shared future. If you feel you have the right partner who loves and cares about you and your financial goals, then make sure to read about common wedding money mistakes and avoid them. This will ensure a safe future for you both.

Financial Habits You Should Start Building in Your 20s

Your 20s – while everyone’s busy telling you these are the best years of your life, they often forget to mention these are also your most powerful years financially. Not because you’re making bank (let’s be real), but because time is on your side. Following are a few effective money habits to build in your 20s:

financial habits for your 20s

The Emergency Fund Check

Let’s start with some truth bombs, life loves throwing curveballs when your bank account least expects it. That mysterious car noise? It’s probably expensive. That weird pain in your tooth? Your dentist’s kids need college funds too. Building an emergency fund isn’t about being pessimistic; it’s about sleeping better at night.

Start small, aim for $1,000, then work your way up to three months of expenses. Keep this money somewhere boring and accessible, like a high-yield savings account. And no, cryptocurrency doesn’t count as an emergency fund, no matter what that guy from your gym says.

The “Future Self” Fund

Think of saving as sending money to your future self. Set up automatic transfers right after payday – even if it’s just $50. Your future self will text back with thanks.

The Credit Score Game Plan

Your credit score is like your adult report card, except this one actually matters. The secret is to use credit cards like debit cards – only spend what you have. Pay the full balance monthly, and watch your score climb like you’re playing the easiest video game ever.

Here’s a personal tip – set up autopay for at least the minimum payment. It’s like having a responsible adult twin handling your bills. But remember, paying just the minimum is like bringing a spoon to a knife fight – it’ll work, but not very well.

The Investment Learning Curve

Investing in your 20s sounds about as realistic as becoming a social media influencer. But the thing is, you don’t need thousands to start. Many apps let you invest spare change or small monthly amounts. The key is starting before you feel ready.

No, you don’t need to understand every market trend or become a Wall Street expert. Start with low-cost index funds – they’re like the Netflix of investing, giving you a bit of everything without the drama of picking individual stocks.

The Lifestyle Inflation Defense

Getting a raise feels amazing but suddenly, that fancy coffee maker or new phone seems totally reasonable. This is lifestyle inflation, and it’s sneakier than a cat at midnight. 

To prevent it, each time you get a raise, immediately divert half of it to savings or investments before your brain has time to plan purchases.

Remember, living like you’re broke (even when you’re not) isn’t about deprivation – it’s about building a foundation that lets you live like you want later. Plus, it makes those occasional splurges feel way more satisfying.

The Skill Investment Strategy

Here’s something they don’t teach in school, sometimes the best investment isn’t in stocks or savings accounts, but in yourself. Take that course that could lead to a better job. Learn that skill that could create a side income. Your 20s are the perfect time to invest in your earning potential.

Think of it this way – a $500 course that helps you earn $5,000 more annually is like finding a unicorn in the investment world. Just make sure it’s something practical and in demand, not just an expensive hobby.

Building good financial habits in your 20s isn’t about becoming a money-obsessed robot. It’s about giving yourself options later in life. 

And hey, if you’re reading this and thinking you’re already behind, take a deep breath. The best time to start was yesterday, but the second best time is today. Your future self is already grateful you’re thinking about this stuff.

BTW, if you are a recent graduate and have student debt, then feel free to read ways to escape the debt trap as a recent grad.

FAQ’s

How to Set and Stick to Financial Goals in Your 20s? 

Create specific, measurable goals with deadlines. Break big goals into smaller monthly targets, automate your savings, and track progress using apps. Find an accountability partner and celebrate small wins to stay motivated.

Why Your 20s Are the Best Time to Plan Your Financial Future? 

Your 20s offer maximum time for compound interest to work its magic. You have fewer financial obligations, more flexibility to take career risks, and can recover from financial mistakes. Plus, habits formed now shape your lifetime money mindset.

How to Set and Stick to Financial Goals in Your 20s? 

Start with clear, achievable goals like building an emergency fund or paying off specific debts. Use automatic transfers, track spending with apps, and reward yourself for hitting milestones. Review and adjust goals quarterly.

How to Escape the Debt Trap as a Recent Graduate

Honestly, graduating with student debt feels like starting a race with your shoelaces tied together. After watching countless friends navigate this financial maze (and stumbling through it personally), here’s the real talk about breaking free from the graduate debt cycle.

Abd if you are in your 20s and going to start your financial journey, then make sure to know basic financial habits for your 20s.

How to Escape the Debt Trap as a Recent Graduate

Face Your Numbers (Without Having a Panic Attack)

Look, no one enjoys staring at their debt numbers. But here’s the truth – you can’t map your escape route if you don’t know where you’re starting from. I would suggest you to:

Creating Your Debt Dashboard

Pull up those loan statements, credit card bills, and any other IOUs lurking in your inbox. Grab your favorite beverage (maybe something calming), and let’s get organized. Create a simple spreadsheet showing each debt, interest rate, and minimum payment. Congratulations, you’ve just taken the scariest step.

Understanding Your Grace Period

Most student loans give you a grace period after graduation. Don’t waste this time binge-watching Netflix. Use these months to build your repayment strategy before the bills start rolling in.

Making Every Dollar Count

Fresh graduates often feel pressured to land their dream job immediately. But frankly, your first job might not be your dream job, and that’s perfectly okay. I would encourage you to join a side hustle that can help you gather some cash. 

You don’t need to work 23 hours a day. Look for flexible gigs that fit around your main job. Maybe it’s weekend tutoring in your degree subject, freelance work, or helping local businesses with social media. The key is finding something sustainable that won’t burn you out.

The Lifestyle Reset (Without Living Like a Miser)

Nobody wants to hear “stop buying coffee” or “cancel all your subscriptions.” That’s not realistic or sustainable. Instead, let’s talk about smart adjustments that won’t make you miserable.

Consider your living situation – could you handle a roommate for a year or two? That could potentially cut your biggest expense in half. Look for ways to socialize that don’t break the bank. Host dinner parties instead of going out, find free events in your city or start a hiking group with friends.

Repayment Strategy That Actually Works

Here’s where many graduates get stuck – they know they need to pay off debt, but which one first? While the debt avalanche method (paying the highest interest first) makes mathematical sense, sometimes the debt snowball (paying the smallest balances first) provides the psychological wins you need. You can choose anyone according to your financial conditions, but making an emergency fund before that is critical, here is how:

Emergency Fund is Non-Negotiable

Before throwing every spare penny at your debt, build a small emergency fund. Even $1,000 can prevent you from sliding backward when life throws its inevitable curveballs. Think of it as your financial airbag.

Making Peace with the Process

The hardest truth about escaping debt is that it’s a marathon, not a sprint. You’ll have months where everything goes according to plan and months where it feels like you’re moving backward. That’s normal. The key is building sustainable habits that you can maintain long-term.

Create celebration milestones along the way. Paid off your first loan? That deserves recognition. Found a way to increase your income? Celebrate that win. These moments help maintain momentum when the journey feels endless.

And here’s something rarely discussed: it’s okay to invest in your future while paying off debt. If your company offers a 401(k) match, take it. If you need to buy a suit for interviews, do it. The key is making conscious choices rather than mindless spending.

Your degree wasn’t just about the piece of paper – it was about investing in your future. The same goes for your debt repayment journey. Each payment isn’t just about reducing a number; it’s about building the foundation for your financial future.

What Is an Emergency Fund? Your Financial Safety Net Explained

Life is unpredictable, from sudden car repairs to medical emergencies or job loss. Building an emergency fund should be at the top of your financial priorities as it can protect you from these financial disasters.

what is an emergency fund

What is an Emergency Fund

An emergency fund is your financial umbrella for those rainy days. It’s money you set aside for unexpected expenses and emergencies, separate from your savings accounts.

Think of it like your financial backup plan, it’s cash for life’s “uh-oh” moments. I would keep this money in a savings account, separate from their everyday spending money. I know it’s not the most fun way to use your cash but it works for me.

Why You Must Have an Emergency Fund

  • Because life loves to throw expensive surprises at you when you least expect them – broken appliances to medical emergencies.
  • So you don’t default on credit card debt or take shady loans when you’re in a pinch.
  • You’ll sleep better knowing you have a financial buffer between you and financial disasters.
  • So you can quit a toxic job or move cities without freaking out about money.

How much should you save in an Emergency Fund

You’ve heard that magic “3-6 months of expenses” rule for emergency funds but let’s get real – that’s like climbing Mount Everest when you’re just starting out. Start with whatever you can, even if it’s just aiming for $1,000 as your first milestone. As we all have different needs and priorities, ask yourself these questions might help:

  1. Do you have a family to support?
  2. Freelance with unpredictable income?
  3. Have pets that need expensive vet care?

See having something saved is 100 times better than nothing, even if it doesn’t match the textbook amount.

Where Should You Keep Your Emergency Fund?

I would say a boring old savings account works fine, or better yet, a high-yield one if you want to earn a few extra bucks while it sits there. Just don’t get fancy with investments or long-term CDs. Trust me, the last thing you want is to wait three days to access your money when your car’s sitting dead in the driveway.

How to Build Your Emergency Fund

Building your emergency fund doesn’t happen overnight and that’s okay. The key is to start somewhere and make regular contributions. Consider setting up automatic transfers from your paycheck – even $50 or $100 a month adds up over time.

Look for opportunities to add extra money to your fund whenever you can. You can add money from tax refunds, bonuses or side gig earnings to build your safety net faster.

One thing I want to say is that while it might be tempting to invest this money for higher returns, don’t. Emergency funds need to be liquid and accessible quickly so don’t keep your money locked away.

Stay Financially Aware Stay Financially Safe

How to achieve Financial Independence? Explained in simple language

How to achieve Financial Independence? Explained in simple language

Almost everyone in today’s era wish to have financial independence. At least most of the people I have met wish so. Isn’t it?

However most of them have no idea how to become financially independent?

financial independence

 

Oh yes, I have heard this term many times in TV talk shows and have also read about it in the newspapers. It sounds too complicated to me. Can you explain to me what is Financial Independence in a simple language?


Financial Independence is a state which is achieved when you have earned and saved enough money so that you do not have to work anymore to support your lifestyle for the rest of your life. In short, you do not have to work to earn money. Don’t get confused. You still can work even after achieving financial independence. You can do whatever work you like, you can work just for pleasure. Financial Independence means you no longer have to slog that 9-10 hour shift everyday in order to pay your monthly payments, credit cards etc.

 

Wow, this sounds great. Can you throw some light on how can I be Financially Independent?

There is a simple time trusted formula with few set of rules for achieving Financial Independence.

  1. Your spending should always be less than your earnings
  2. Increase the GAP between your income and savings – Earn more
  3. You must invest what you save judiciously

If you follow the above 3 step formula, none can stop you from achieving financial independence.

high-income-1

 

Hmm… looks simple per say but how to implement this into practical life?

Ok, let’s take each step one by one

 

  • You must always spend less than what you earn:
      1. It’s quite possible to spend less than what you earn. If you are able to control your spending habits, you will be able to achieve this equation. First tool to achieve this is Budget. A simple budget can save you from many things. It will tell you where your money is going without you making a note.
      2. Don’t splurge in buying that big house just because you can afford it. Buy the right size house. Home ownership can be a quite expensive affair.
      3. Don’t buy big automobiles. Remember, your car is not your asset. Monthly payments on big cars will never let you move towards financial independence.
      4. Be little frugal in your living. Cook at home, eat out less frequently. This will not only save you money but also save your health in the long run. Stay fit and be WEALTHY.

 

  • You must strive to Increase your earnings:

 

      1. Importance of education can never be denied. If you are well qualified academically, you have a better chance to land a high paying job. Keep working towards increasing your income by augmenting your qualifications, certifications. This will boost your ability to save and invest more towards your main objective, which is financial independence.
      2. If you are good at something, try to earn some income from it. For example if you are good at graphics designing, use your spare time to take up some freelance projects which can earn some side income for you.

 

  • You must invest wisely:

 

    1. Savings are important but savings alone will not make you financially independent. Invest wisely so that your money grows at a healthy rate
    2. Use a mix of equity, debt and use diversification so that your investments remain recession proof.
    3. Invest from day 1 of deciding that you want to achieve financial independence. Do not wait for the right time to invest.
    4. Avail tax exemptions to minimise the loss of money to taxes.
    5. Structure your investments properly and practice goal based investing

 

If you are able to achieve a healthy saving and investment rate month on month and manage your investments properly, you can be financially independent sooner than you expect.


We at WealthSamurai always believe in a healthy savings rate and proper investments as the best tool to take control of your financial life.

That’s really a helpful. But how do I know the details like where to invest, which stock, which fund to buy?

 

Once you start tackling the three points mentioned above you will get more insight into the micro equations like where to invest, what amount to invest, what percentage of diversification is required etc. But important is to take the first step towards financial independence and keep going.

 

Happy Investing !!!

 

Seven Baby steps towards financial freedom

Seven Baby steps towards financial freedom

Do you know how marathon runners are trained?

If someone thinks he should run a marathon, and goes for the run very next morning what will happen? It will be a disaster for him. Right?

baby steps to financial freedom

 

A marathon runner must start small initially with 1 kilometer, 2 kilometers run and so on. He has to gradually attain the 42 kilometers mark. He has to gradually build stamina, develop endurance, have many practice sessions before he hits any competitive race.

All this happens over a period of time. This can not happen overnight. Hope you all agree with me on this. A runner has to set small milestones first like a 5 kilometer run, 10 kilometer run, a 25 kilometer run and so on. Once all small milestones are reached, a runner can confidently go for a full length 42 kilometer marathon.

Same is with financial planning. If you are at ZERO level or you have just started journey towards setting finances in order, thinking about financial freedom will look impossible to you. Journey towards financial freedom is a long journey. You have to create numerous milestones which will make the journey also interesting and you will always be motivated throughout the journey. Achieving these small milestones will also give you a sense of accomplishment in the course of the journey. Not to forget, these milestones will also keep you away from backtracking.

Below are some important milestones you can create in order to stay focused and not to lose interest while journeying towards financial freedom. The order is important as you can not run a full marathon without conditioning yourself for a half marathon. Isn’t it?

 

climb to financial success


Step 1
Start making a budget. Write down all expenses month on month. It is important. It will help you in knowing your spending  pattern.This will also give you an idea about your investable surplus – the money which you can utilize for investments moving forward. (How to make a simple budget)

Step 2
Save about 6 months of expenses in cash or liquid funds. This amount should be easily accessible to you. This is your emergency fund. This is meant only for emergencies like some medical attention or in case you lose your job. This will keep you afloat when you do not have any income to take care of expenses and will help you in not falling in debt trap during any personal emergency.

Step 3
Gradually but steadily pay off all your consumer debt. Consumer debt is considered as a bad debt for an individual. Debt for TV, appliances, vehicles, furniture etc falls under consumer debt. One these debts are tackled, you free up a large monthly investable surplus.

Step 4
Start saving for retirement. Most of us will not receive any pension or annuity. Keep somewhere around 25%-30% of your monthly salary as your investment for retirement. Make a good balanced folio and start investing. Your folio can be a combo of Debt, mutual funds, PPF etc.

Step 5
Start investing for your kid’s education. You can dedicate an equity linked mutual fund for this. Also you can open a PPF account when your kid is born and maximize investment into it every year. A combo of PPF and an equity linked mutual funds can do wonders for your kid’s future.

Step 6
Pay off your mortgage/home loan. This will remove a big burden from your head. It is good to feel debt free. But this is little tough as usually the amount is quite high. But I strongly recommend you to do this as paying off mortgage will free up a huge chunk of money for you as an investable surplus.

Step 7
Keep re-adjusting your portfolio once in a couple of years and enjoy life. Keep reading, pursue your hobby, keep traveling but remember that your money has to outlive you.

These are small steps. You can start any time, at any age. Important is you make a START.

Happy investing !!!

Are you an impulsive buyer?

Do you often drag yourself into impulsive buying?

 

“An impulse purchase or impulse buying is an unplanned decision to buy a product or service, made just before a purchase.One who tends to make such purchases is referred to as an impulse purchaser or impulse buyer. Research findings suggest that emotions and feelings play a decisive role in purchasing, triggered by seeing the product or upon exposure to a well crafted promotional message.”

impulsive-purchase

 

In your day to day life, knowingly or unknowingly you go through instances where you succumb yourself to the lure of impulsive buying. The product companies are out there in every shop, every mall, every online marketplace – blaring adverts, offers, packaged deals to you. We have seen earlier that Supermarkets do extensive research on how to push their products and how to compel buyers to spend more in their stores.


Can you give me some example so that I can relate whether I am buying stuff impulsively? As far as I know i am not into impulsive buying

  • When you go to supermarket to buy monthly grocery, you pick up few ready to eat meals as they are packaged beautifully and kept in the front area of supermarket. They always have “buy one get one free” offer

  • You go to shopping mall to purchase refrigerator and you end up buying that 75inch LED TV also just because there was an offer going on that. You , being a sincere shopper, got charged emotionally and purchased the big TV just because your conscious felt that you are saving substantially on this purchase. You didn’t even give a  thought to what you will do with the TV set adorning your living room which you bought last year in similar fashion

  • How many times you have noticed that you enter mall for grocery shopping with a budget of INR5000 and end up spending INR 1500 on grocery + “something else” which had a GREAT offer?

 

Yeah that’s OK, but sometime you need to grab the offer that is going on else you will miss the boat and God knows when such offer will return?

A seasoned impulsive buyer always suffer with FOMO – Fear of missing out. If you add up all impulsive MISCELLANEOUS purchase over a period of time, you will be shocked to know the amount you have spent on these purchases.

 

Below I am listing few reasons – why people shop impulsively

 

  • Love of shopping – some people simply love shopping. For them shopping is like a therapy. They are always under illusion that few items here and there won’t disturb their bank balance.
  • Some shoppers are always in loss aversion mode. They fear that if they do not buy certain items which are on sale, they might end up at losing a big amount of money.
  • Some shoppers succumb themselves to twisted offer phrases. “Buy 2 get third free” , “buy this and get that free” etc. The moment they see these offers, they succumb to it without further researching about the product, service, and quality.
  • Some shoppers have genuine desire to save more. They succumb to the offers on supermarkets which says “you save INR100” , “Buy & save INR1000”. In order to feel good , they buy these items.
  • Some shoppers always feel that they should have an edge over others when it comes to latest gadgets, latest fashion , latest automobiles. They always pick up items which they feel will make them look cool among their social network.

 

 

Hmm.. Sounds right. I never knew impulsive shopping is such a bad habit and I must admit that I myself must have lost a fortune by now through impulsive shopping.

Yes, impulsive buying is harmful. By the time one realise this, he/she would have lost a huge fortune on it. This could hamper your financial planning, your early retirement, your retirement plan and can pose a big threat to your financial independence planning.

Below I am keying in few important actions through which we can avoid impulsive purchase

 

  • Always make a shopping list when you go out for shopping – AND “Stick to it”
  • Follow a mandatory waiting period if you plan to buy anything. If you see anything which you wish to purchase, wait for 7 days and see if after 7 days do you have the same urge to buy that thing? Most of the time the urge is momentary and it dies down soon.
  • If you already owe the item you wish to buy and you intend to replace it, clean it. Now see if you have the same urge? E.g. if you have a pair of shoes and you intend to replace, clean the old pair, wash it / polish it. If you still feel that you should go for the new pair, then go ahead
  • Remember – only fools rush in. All gadgets, the first edition always have some glitches and service issues. Better to wait and go for later releases. They are relatively bug free and cheaper.
  • List down your impulsive purchases – revisit the list periodically so that you do not make the same mistake again
  • Keep decluttering your house often. This will keep you in check of all the items you have and you will not end up buying them again. This is specially applicable for stationary items and tools.
  • Avoid going for shopping with RICH friends or friends who are spendthrift. Believe me, you will save a lot by doing this
  • Don’t save your credit cards at online shopping sites. If you save then it’s a matter of few clicks and online order gets executed.
  • Buy all items cash. Parting with currency notes is much more difficult compared to swiping plastic cards.

 

 

Great. Very practical points. I am sure I can implement these easily in my day to day life and I can save loads of money by doing this.


Yes, the advice given above is quite practical in nature and easy to integrate in your lifestyle. Always remember it’s your own hard earned money. By avoiding impulsive buying you can use your money in much better way.

 

Happy Investing !!!

What are money leaks? How to find out your money leaks and plug them?

“A money leak in a simple language is the money you have spent but you don’t know where you spent. “

Money leaks are just like water leaks from a container. End of the day you don’t know that water is leaking and container becomes empty.

“For example you draw INR 2000 from ATM on the way back to home from workplace. You buy grocery for INR 1000 , vegetables for INR 750, stationery items for INR 150  and have a coffee for INR 100. Somehow next day you forgot that you had coffee previous night and you still think you have INR100 with you from previous withdrawal. This FORGOTTEN INR100 is the “Money Leak” for you. So when you sit down to write expenses over the weekend, you are able to account for INR 1900 out of INR 2000 withdrawn from ATM and unable to account for INR 100 you spent on your coffee.”

 

Money leak - how to fix it

 

Ok Great. But I am good at accounts and I can remember what expenses I incur. So Money leak for me is out of question.
Good. but still as the phrase indicates “money leak” is small expense here and there which is tough to account for at a later date. You may not remember or you may not be knowing the money going out for some expense. But these small expenses can add up later and over a period of time can be a big financial disaster for you. If you compute total spend over a large period say 5 years, these leaks can set you back by a huge amount when you consider the principal amount as well as loss of investment potential of the leaked money. It can directly affect your net worth and can play a spoilsport while planning your financial independence.

 

Hmm Sounds scary. Can you list down few other money leaks so that I get more clarity on where else i am losing money to Money Leaks?

 

  1. Paying upfront for a subscription:
    You make a resolution to stay fit on the new year eve. First day of the new year you go to the best Gym in the neighborhood and register yourself. The gym has an offer that you pay for 12 months upfront and you get 13th month free. You succumb to the offer and pay for the 12 months at on go. You are pumped up and start visiting the gym. After about a week or two, you come to know that Gym is about 10 minutes away and by the time you return from work it’s already late evening. You don’t have energy left to change and again drive for 10 minutes to the gym , work out for 30-45 mins and come back late night. Hence you gradually stop going to the gym. This is a big money leak. You have paid for 12 months to the gym upfront and you are not using it

  2.  Not switching off power appliances:
    The electrical appliances at home are always switched on like AC/Heating/Fans/Lights /modem etc and often you forget to switch them off when you leave home. This is the reason why you bang your head every month when electricity bill comes.
  3. Having low rated power appliances:
    Electrical appliances at home are not rated good for energy savings hence they drain more electricity and you end up paying more charges for electricity consumption.

  4. Having multiple bank accounts:
    You have to maintain a certain minimum balance in each of the account which makes your money sit in a low interest savings account. You are losing on investment potential with the idle money.

  5. Buying too big vehicle :
    You do not need a truck type gas guzzling SUV for a nuclear family living in city. You will not be able to use vehicle to its full potential. For a city you need a good mileage vehicle which is small so that you can squeeze it in tight parking spaces. A big car means higher monthly payments, high insurance premium, high maintenance cost and lot of inconveniences when taking it around the city which has usually tight parking spaces.

  6. Buying too big house :  
    For a nuclear or small family you do not need too big house. Bank will always try to convince you to buy the biggest lot available based on your monthly income. Their logic is monthly payments will not pinch you after few years. But what about now? A big house always has higher monthly payments, higher maintenance cost per square feet, higher property tax and not to mention, higher cost of upkeep. It also consumes higher electricity in terms of cooling, heating etc.

  7. Paying your fund manager for frequent switching of funds/stocks through Portfolio management service (PMS) :
    Fund managers will switch frequently but the cost of switching would be recovered from you as an investor. At the end of the day, the absolute returns will tell you that how much the switching has costed you.

  8. Not shopping around while taking any insurance : This can cost you dear as there is a considerable swing in the premium paid from different service providers. If you lock in higher premium, entire life you would be paying higher premium which over the years will result in huge money drain.

  9. Not doing price comparison and proper research before purchasing any expensive item :
    Here again the price can vary from store to store. Best is to compare the prices online and then hit the shop for bargaining.

  10. Having multiple internet data connection at home:
    If everyone in the family has his/her own plan for data connection, there will be money going into drain. Almost all service providers give family plan for voice and data or some group connection which can save tons of money over a period.

  11. A big sum of money sitting idle in savings account:
    This also a big money leak. You lose a good 3%-4% on earnings plus the investment potential of the money.

I can quote a 100 more examples from day to day life where there is money leak. I am sure most of the readers too would not be knowing points mentioned above to a certain extent.

Yes, even I was not knowing few things like letting money sit idle in savings account, choosing insurance premium etc. It’s scary. Now, tell me how to identify and avoid money leaks in real life?

 

Again avoiding money leaks is not a rocket science. It’s more of a common sense. You need to be vigilant about what expenses you incur, make a note of them and review the expense sheet periodically. You are home if you follow this diligently.
Below are few simple steps which you can take to find money leaks and fix them so that they don’t trouble your finances.

 

  • Save all receipts of every payment you make for the entire month and tally them at the end of the month so that you don’t miss out on any ghost expense.
  • Use a budget and STICK TO IT. Click here to know how to make a simple budget.
  • Avoid money leak places. For example when you go to multiplex to watch a movie, avoid food court during the break. The price of food items and beverages there are exorbitant. Nothing can justify the prices they have. A family can be down by a couple of thousand rupees if they snack and drink at the multiplex food court.
  • While visiting malls , do not buy anything expensive just because there is discount on the price. Always compare prices across different places, research the product well and then only buy.
  • Beginning of every year, do review all the memberships and subscriptions. Cancel anything which is not required.
  • Study a little bit on how to invest money in mutual funds, stocks, bonds etc. Trust me it is not difficult and if you know what you are doing, you can save tons of money. Plenty of FREE study material available online and plenty of tools to invest makes it easy for you if you know the basics of investing. Why to pay someone else to manage your money? Do you think they will do a fair job?

 

Again it depends on an individual to what extent he / she is able to identify and plug the money leaks. Ideally one should start with every service provider, day to day shopping, monthly grocery shopping and identify where they are leaking money.

After reading this article I am sure you should be able to identify money leaks and then take measures to plug the leaks. First cycle of identifying and fixing money leaks may take little time but once you are set, it won’t be difficult for you to identify leaks immediately and fix them. Money leak should be tackled on priority as it’s a big hindrance in wealth creation and can cause a considerable delay to your financial independence.

 

Happy Investing !!!