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Human Behaviour In Financial Wellness

Human Behaviour In Financial Wellness

Warren Buffet, is a legendary investor and commonly referred to as “Miracle of Omaha”, has a lot of things to teach us when it comes to behavior.

He started the habit of saving at the age of 13 by selling newspapers, and still lives in a house which he bought with his own money (i.e. no debt) in 1958. Also, the last time he changed his car was in 2014.

Lets, point out few specific behaviors which we should be aware about in regard to financial wellness:

1. Procrastination: Waiting to achieve a milestone in life before you start to take financial decisions could cost you very heavily. Humans have the tendency to defer difficult decisions and stay in their comfort zone and this is one of the reasons why we never start. The idea here is to just start!

2. Always-safe syndrome: One of the key aspects of financial wellness is to cover your risk but generally we tend to think that extreme situation never come close to us. This approach deters us to focus on insurance since you cannot really quantify the gains from it. To help overcome this issue we need to be conservative and rationale in life such that we rightfully assess risk.

3. Gold and real estate is not financial wellness: People like to think real estate and gold as the financial cushion of their life and very often miss out on other alternatives which not only cover your financially but will also simplify things at the time uncertainties. You should not invest in depreciating assets and something which fails to keep up with the pace of inflation.

4. High leverage: Access to credit card and easy finance is one way to put common people at brink of bankruptcy and therefore it is essential to avoid debt at all cost. It may seem luring for people to use credit card for every purchase but it is important to note that when we falter on payments or use it rather casually, our credit score also suffers.

5. Be on the savings side: Instead of spending money on the spot, it is better if we stop and think for a moment. The question that we need to ask ourselves here is “do I want it, or do I need it?” Make a list of things that you want, and things that you need so that you get a firm understanding of where you can save. You will be surprised to see how much money can you save by not spending your earnings on the things that you want, but don’t necessarily need it.

These above behaviors need to be kept in check so that we excel in achieving financial wellness. Keep in mind, the above points are not an exhaustive list and there are many other behaviors which can have detrimental effect on our finances. But the most important aspect of financial wellness is to invest, and save at least 20 percent of your total income.