Categories: Financial PlanningReal Experiences

5 Personal Financial Mistakes that I have committed…!

My article on ‘The 6 most common Personal Finance Mistakes’ have become very popular among my blog readers. After reading this article, one of my blog readers has suggested me to publish an article on the ‘personal financial mistakes that I have committed ’.

In this post, I have shared about my personal financial mistakes and some of the investment or personal finance lessons that I have learnt over the past 10 years.

I got my first job in 2003. As soon as I completed my MBA, I got selected in a campus placement. It was with one of the top Job Portals in India.

In 2004, I had joined Infosys BPO. The salary which I used to get was sufficient to meet my monthly living expenses. So, no major savings or investments were done during this period.

Later in 2005, I had joined an US Mortgage Processing company in Bangalore with a good hike in my salary. This had resulted in good amount of monthly savings. Like any other employee, I too started worrying about my TDS (tax deducted at source).

I had started thinking – how to save taxes? Where to invest my savings? Which are best investment options? How to make quick bucks by investing my monthly savings? 🙂

In the same year (2005), I got married and my wife too was employed in the IT field. So, double income, more savings, more thoughts about investment planning..

I believe that I have committed most of my Personal Finance mistakes between 2005 to 2007 and took corrective action during 2008 to 2010. Below are the details;

Related latest article : “A comprehensive list of the most common MONEY mistakes!“

My Personal Financial Mistakes

Mixing Insurance & Investment

I believe that this is the most and very common personal finance mistake that many of us commit. I invested in an ULIP (Unit Linked Plan) in 2005 for two reasons – i) to claim life insurance premium as tax deduction under section 80c & ii) one of my good friends was a Life insurance agent and wanted to help him achieve his business target 🙂

The ULIPs which were issued before Sep 2010 had very high cost structure. The charges (such as premium allocation, policy administration in ULIPs) are usually front-loaded, which means only a smaller proportion of my premiums were invested in the initial years. So, I was very disappointed looking at the returns generated by my ULIP. Finally, I had surrendered this policy in 2010.

I had also bought one Traditional Life insurance policy (Endowment plan) in my name in 2006. The reasons for buying this plan are same as with the case of ULIP. In 2010, I had realized that all I need is one Term insurance plan and there is no requirement to have high cost – low yielding Endowment plan. I had surrendered this policy in 2010.

(Read : Traditional Life Insurance Plan – a terrible Investment option?)

Short Term Trading & Intra-day trading

My first investment in stock markets was in Ashok Leyland scrip in 2004. I remained invested in this stock for just 3 days only. I would have monitored the price of this stock for atleast 100 times over those 3 days 🙂 . My aim was to get atleast 5% returns on this investment. I had lost patience and sold it for loss on the fourth day.

I lost huge amount of money by doing day-trading also. I have lost money trying to make a quick buck. I used to trade in stocks purely based on tips and recommendations given by the analysts. All this happened during 2004 to 2007.  I played short-term investing game without knowing the rules of the game.

I had incurred a total loss of Rs 3,08,129 because of Intra-day trading (during 2005-2007 period).

Invested in lot of Mutual Fund NFOs (New Fund Offers)

I used to buy and sell Mutual fund units very frequently during 2005 to 2008. I had invested in way too many Mutual fund schemes (in total 15 MF Schemes) without any proper research. Also, I had invested in many New Fund offers (NFOs) when I had an option to invest in well performing funds with good long track record.

During 2009-10, I started tagging my financial goals with the investments and redeemed all the unwanted mutual fund investments.

In 2009, I had requested for a consolidated mutual fund account statement from my distributor to understand and quantify the loss that I had incurred. Yesterday, I had spent almost one hour to trace this statement and finally succeeded in finding it. Below are some of the screenshots of my NFO MF investments in 2005-2006.

Not claimed the speculative losses in Income Tax Returns

As shown in one of the above pics, I had incurred huge losses because of intra-day trading. This is categorized as speculative loss. The loss from speculative business can be set off against profit from another speculative business income. Also, un-absorbed speculation business loss can be carried forward for a period of 4 years. I had not set off my speculative losses against speculative profits (had a chance in one of the FYs).

Lent money to a Friend

A friend in need is a friend indeed. We generally approach our friends or close family members when we are in need of any financial help.

In 2005, one of my office colleagues (my immediate boss) had requested me to lend him money. He had told me that his mother was seriously ill (kidney related disease) and borrowed Rs 85,000 from me (I later came to know that it was a lie).

All I could get back is Rs 12,000 only. I tried all possible ways to get back my money but all proved to be in-vain.

Below are his hand-written agreement (got it in 2007) on plain paper and post-dated cheques (which I couldn’t en-cash). 

I might have lost money doing share-trading but this mistake of mine has hurt me the most till date. He is now working for an Indian IT Company as a Senior level manager.

You can find similar cases like mine in the comments section of my article ‘What is Promissory Note?‘.

As Shakespeare wrote, “For loan oft loses both itself and friend.” If you lend money to a friend or family member, beware that you may not get your money back and your relationship may never go back to normal. So, you lose both friendship and money. Think twice before lending money to a friend. Sometimes its better not to lend money to a friend keeping their best interests in mind.

Below are some of the Investment or personal finance lessons that I have learnt over the last few years;

  • Most of the Personal Finance or investment lessons can be learnt only by experience. Once you learn, try your best not to repeat the same mistakes again. Write down the mistakes that you have committed and don’t repeat them.
  • Don’t start your investment planning by identifying a product first. Instead, create your investment plan by identifying your financial goals first and then shortlist the investment options that are suitable to you. (Read : ‘How to create a solid investment plan?‘ & ‘List of best Investment options‘)
  • Learn to say a firm NO to unwanted financial products even if they are being sold by your near and dear ones.
  • Try not to take or not to give money to friends/relatives. If you do not want to lend money, gently refuse the loan and identify the best alternate to help your friend or loved ones.
  • Don’t gamble with investments. Avoid short term trading and/or Intra-day trading in Stock markets. (Read : ‘10 reasons to avoid Short-term Trading in Stock Markets‘)
  • We invest in a Time Deposit (Fixed Deposit) and wait for 365 days to get 8% returns. So, lets’ implement the same strategy with respect to stock market investments (if any). Invest for long-term.
  • Understand the power of compounding. (Read : ‘What is Time Value of Money?‘)
  • Invest as early as possible, as much as possible and as frequently as possible in suitable investment avenues.
  • It is prudent to invest in investment options that you can understand.
  • The day when you feel happy and excited to invest more in stock markets for your long-term goals, that day you can consider yourself as a balanced and matured investor 🙂
  • Sometimes, booking losses or surrendering unwanted life insurance policies can be beneficial. It’s ok to make mistakes but don’t wait unnecessarily and compound your mistakes.
  • Following tips blindly and having heard mentality is very dangerous to your financial life.
  • Know what is ‘conflict of interest‘ when buying financial products from banks / advisers / agents / distributors.
  • Keep your investment plan as simple as possible.
  • Tag your financial goals with your investments.
  • Kindly understand what is diversification. Over diversification or under diversification, both may not be beneficial.
  • Have realistic expectations from your investments.
  • Live within your means.
  • Don’t take financial advice from too many people.
  • Take professional help to prepare and file income tax return.
  • Generally most of us tend to make investments based on the tax treatment or the tax benefits available at the investment stage only. However, we need to be aware of the taxation rules applicable in all the three stages i.e., investment, accumulation and withdrawal. (Read : ‘Tax treatment of various Financial Investments‘)

Did you make any personal finance mistake(s)? What are the Investment lessons that you have learnt in your financial life? Kindly share your views. Cheers!

(Image courtesy of Sira Anamwong at FreeDigitalPhotos.net) (Post published on : 12-Aug-2016)

This post was last modified on September 27, 2023 3:28 pm

Sreekanth Reddy

Sreekanth is the Man behind ReLakhs.com. He is an Independent Certified Financial Planner (CFP), engaged in blogging & property consultancy for the last 14 years through his firm ReLakhs Financial Services . He is not associated with any Financial product / service provider. The main aim of his blog is to "help investors take informed financial decisions." "Please note that the views given in this Blog/Comments Section/Forum are clarifications meant for reference and guidance of the readers to explore further on the topics/queries raised and take informed decisions. The information provided, therefore, should not be viewed as financial, legal, accounting, tax or investment advice."

View Comments

  • Nice one Sreekanth. I did the same mistake of playing with the stocks for Short Term. Later realized the fault.

    The basic things are

    1) Term Insurance which every one needs ( Many still feel why do we need to take Term Insurance)
    2) Health Insurance for your Family even oif you have one with the compmy
    3) Health Insurance for your Parents
    4) Short Term and Long Term Goals and how to achieve them.

  • I am a regular reader of your blogs and inspired with your investment ideas. I was not having any tracker or any investment goals. After reading your articles I am getting organised my personal finance. Could you please review my portfolio and suggest me an investment options? I have very generic goal for my daughter marriage and retirement plan.

    Age 33
    Child 1 daughter, Age 1
    Annual Income 16 Lakhs
    FD 70 Lakhs
    House 35 Lakhs
    NPS 1 Lakh
    PPF 5 Lakhs
    EPF 17 Lakhs
    LIC (Profit Plus Tno:188) 1.5 Lakhs
    investment on shares 1 Lakh
    Mutual Fund 20,000 INR
    Medical Insurance with Employer 7 lakhs family flotter
    Loans/EMI zero

      • Dear Sreekanth,

        Thank you very much for your response and valuable links.

        1. Looking forwarded to buy a house for the price of around 80 Lakhs in 2 years. Hence keeping this fund in FD.
        2. My employer have term insurance on me for 1 crore. This is valid as long as I work with same employer.
        3. I invest every year on PPF 3 Lakhs (mine+my spouse) -- for my retirement. Opened recently SSY account on my daughters name for her education. I am hoping to continue this investment for at least next 10 years

        Awaiting with curiosity for your response.

          • Hi Sreekanth,

            I am reading your comments again after 2 years to review my investment.

            1. I didn't buy a house because of my job nature to travel abroad. The fixed deposit increased to 95 lakhs.
            2. The exposure to equity market increased to 4 lakhs only through mutual funds and equity shares trading.

            I want to invest about 65 lakhs from my FD in better place for about 7 years period where I can get more returns with moderate risk. Please suggest.

          • Hi Sreekanth,

            Thanks for your response. I am investing in equities for the time period of 7 years. I will go through if I can take fee-only financial planners.

  • DEAR SREEKANTH, IT WAS VERY HELPFUL OF YOU TO SHARE YOUR MISTAKE.THANK U FOR THAT, JUST GIVE ME A SUGGESTION ABOUT INVESTING IN SIP, I HAVE AN EARNING OF 28K PER MONTH AND WANT TO INVEST LONGTERM AND THINKING OF INVESTING OF 1000/- EACH FOR MIDCAP AND DIVERSIFIED SIP PLEASE SUGGEST SOME RIGHT FUNDS TO INVEST .... THANK U

  • HI NICE ARTICLE, I HAVE ALSO MADE ALL THESE mistakes except lending money to a friend and not getting back, but i was forced to buy a ULIP plan by HDFC bank because i needed a locker facility, now i think bank did a very unfair practice. i have two questions :
    1. my 5 installments are completed but in policy it is written for 20 years, but i don want to invest further my present fund value is good, can i redeem the entire sum , if i choose to remain and not invest further, would it be good?
    2 in lic jeevan anand plan if i decide not to invest further after 4 installments , will my remaining money grow?

    • Dear GAURAV,
      Banks generally suggest for opening of FDs/RDs to allot a Locker facility (though it is not mandatory).
      Selling unwanted life insurance plan (as per your requirement) to you is indeed an 'unfair practice' by your banker.
      1 - Yes, you can redeem.
      2 - It will become PAID-UP policy.
      Read: What is PAID-UP policy?

  • Hi Sreekanth,

    I have one query here.

    My LIC premium outgo for 2 policies (money back and jeevan anand) is Rs. 3304 and Rs. 4240 respectively.
    I dont want to continue with LIC as i have Term plan in place.
    should i surrender or continue LIC?

    pls guide

  • Hi Sreekanth,

    I appreciate your articles and they are very informative. This article is especially very good and eye opening mistakes that you shared and many of us still doing/continuing those mistakes . I also did those mistakes like investing in ULIP plan(Insurance+Investment ) for 6 years which incurred huge losses and tried to earn quick money by investing in share market hoping to get good return in days without having the patience to wait.

    Now i got rid of those mistakes and never tried any investments again.
    Currently i have been in overseas for last few months and want to start investments freshly.
    Could you please let me know which MF's i can invest and what implications for NRI's have while doing investments in India?

  • Hi Shreekanth,
    It is nice to read informative blog which gives lot of info. I want to ask if a tenant is paying some part for society charges and rest as rent then whether the money paid towards society charges should be included in the income from property?
    Regards
    Umesh

    • Dear Umesh,
      Ideally you can include your share of expenses towards Society charges and ignore the amount paid by your tenant when calculating the 'income from house property'.
      You may inform your tenant to claim HRA (if any) net off society charges only.

      • My doubt is whether the amount received towards society charges need to be included in the income from property? Because it will increase my tax liability. What does the rule say?
        Regards
        Umesh

        • Dear Umesh ..Ideally society charges as a separate item can not be deducted. If standard deduction @ 30% is allowed, one cannot seek another deduction towards society's maintenance charges.
          Every month if you receive the entire amount(rent+charges) in cheque, then there is no option even if you state in a rental agreement that,part amount goes to society from me. So you may request your tenant to give separate cheques" one is to you (towards rent) & another one is to society".

  • I would like to share another mistake that I realised it late. Some years earlier, I had a home loan with 10.25% interest rates, I was just happy paying ONLY the EMIs even though I have huge money on Savings Account (more than what I need as emergency) and I was also not putting surplus it in any real investments. It was a tea party of my friend which he had organised as he closed a Home loan within 7 years, I realised i need to do the same. I understood that my surplus money can be put to offset the principal. I made a lumpsump principal payment and then every month regularly took out a %age of salary as a Principal payment over and above my EMI. Everytime I paid more, I reduce the EMI payment (increased the duration) and increased my principal. So each month the interest portion of the EMI was getting reduced. I am glad to say through this regular and planned "investment" my 2 home loans are already cleared. I have more surplus now to make investment for my long term goals.

    • Dear Manja,
      May be you could have continued the home loan and taking tax benefits and instead concentrated on building wealth for your long-term goals.
      Of course there is no right or wrong answer here..just my view :)
      If you are happy and confident enough that you can achieve your goal values then its fine. You are the best person to plan your Financial Life.

      • Hi Sreekanth,
        Appreciate your view. If the situation was today, yes, I think I would have judged higher %age from Mutual Funds. However, the situation that time was that neither I was investing nor closing home loan faster. As you would have known, any new potential investor have second thoughts about investment in MF. Hence closing a debt was seen more reasonable approach. After couple of years, when I continuously read and started investing full time during the end of the closure of Home Loan, I was doing it with more risk aggressive profile. So yes, looking back now, don't think I have regrets but certainly could have done better. I hope others reading this case discussion will make a better judgement.

        I think your article combined with your responses is what make this forum great!

  • Hi Sreekanth,

    I also did same mistake, took ULIP in 2009-24k-20 years , lic policy in 2010-12k-20 years, one more insurance policy in 2011-10k-15 years, just for 80c. Later I came to know that insurance is not an investment and i took pure term insurance last year and this year. But i didn't surrender those policies as more commission was already deducted in first 3 years. so i continue paying it. Are you suggesting me to surrender now?

  • Hi,

    I'm following your website from quite some time.
    Very good insights from all the financial related stuff.
    My question is -when you say monitor a mutual fund for 3 years or above and when its not performing then stop and switch to new fund, what to do with the accumulated units of the old MF ? If you say redeem them and where to invest that lump sum amount in? or one should just stop doing SIP to that particular fund and keep those units as long as your goal reaches like 5-10-15 years long period?
    please suggest me with this.

    Thanks,
    Rajesh

    • Dear Rajesh,
      It depends on the track record of the fund and how consistent have the returns been.
      For example : A fund like HDFC Top 200 has been not performing well offlate, but it can be counted as a consistent fund if you look at long track record.
      In my case, I have been investing in UTI mid-cap for the last few years, it is not in the top performers list and also the fund manager has been changed, but still I have been investing in it as I am satisfied with the fund's returns.
      If the fund does not perform well say in next 2 years or so, I prefer to retain my units with the fund and invest future SIPs in some other Consistent mid-cap fund.
      I will keep an eye on UTI mid-cap and check the performance of it with the new fund that I may buy and then take a final call to move the total existing units.

1 2 3 4 5
Leave a Comment
Share
Published by
Sreekanth Reddy
Tags: Common Personal finance mistakesPersonal Financial Mistakes
September 27, 2023

Recent Posts

ITR Belated vs Revised vs ITR-U – Which One Should You Choose?

Filing your Income Tax Return (ITR) is not just about meeting deadlines—it’s about choosing the…

April 29, 2026

Best Pension Schemes in India (2026) – EPS, NPS, APY Explained

Retirement planning in India is often misunderstood. Many people think any long-term savings or investment…

April 24, 2026

Property Valuation Guide: How Your Home Is Really Valued

You’ve probably seen the same property quoted at different prices. One person says ₹60 lakh,…

April 21, 2026

Moratorium Rule in Insurance – When Can Insurers NOT Reject Your Claim?

Buying insurance is easy. Getting your claim settled—that’s where the real test begins. For any…

April 15, 2026

Immovable Property Gifts Above ₹45 Lakh Now Under SFT: What Changes from 1 April 2026?

Gifting immovable property—like land, plots, or houses—is super common in India. Families often do it…

April 11, 2026

The ETERNAL Financial Planning Framework: A Practical Approach to Building Long-Term Wealth

Most people believe that investing alone is enough to create wealth. But in reality, many…

April 9, 2026

This website uses cookies.