We invest to grow wealth or achieve our goals—there’s no third reason to invest. Yes, maintaining purchasing power is part of growth, but chasing faster growth or outperforming others is not a goal. Your money grows when you do three things right:
- Invest the right amount (Present Value).
- Give your investments enough Time to compound.
- Align your investments with your Risk Appetite.
These are straightforward principles. Yet, many investors struggle to grow their wealth or achieve their goals because they deviate from these basics. Surprisingly, many don’t even have defined goals. Instead, they make random investments, hoping to grow their money quickly without a structured plan.
It’s often said that while investments generate returns, investors fail to enjoy them. Why? Because we’re victims of our behavior. We tend to blame others—advisors, market conditions, employers, or government policies – for our poor financial outcomes. But let’s face it: in many cases, investments are not missold; they’re misbought.
Today, I’m sharing five bad money habits that might be holding you back from achieving your financial goals. If you recognize any of these, it’s time to take corrective action.
5 bad Money Habits and How to Tame Them
1. Chasing Returns
Yes, you invest for returns—but how much is enough? The endless quest for higher returns often leaves you dissatisfied with your investments. You start searching for so-called “better opportunities,” often pitched during bullish times, and invest in them without considering their suitability for your profile.
It starts with mutual funds, moves to direct stocks, and then escalates to trading in Futures and Options. Some investors go even further, diving into cryptos—all to chase high returns.
The problem amplifies when this hunger for returns becomes a desire for quick growth. This is when you become vulnerable to mis-selling. It’s like planting a mango tree and expecting it to bear fruit overnight. You lose patience, abandon proven strategies, and fall for short-term pitches that promise the moon but often deliver losses.
Fintech platforms, which you often use for their ease and “free” access, cash in on this behavior. They cleverly display past returns of high-performing products and highlight enticing strategies. This keeps you hopping between options, losing focus, and often money—while these platforms continue making theirs.
The underlying issue is this: your constant pursuit of “better” never lets you appreciate or stick with “good” investments. The best always seems to be on the other side of the fence.
The Success Formula:
If you truly want to grow wealth, focus on disciplined investing and long-term goals. Chasing returns is a bad money habit that may feel like running faster, but in reality, you’re just running in circles. Wealth creation requires patience, a sound strategy, and trust in the process.
2. Untimely Discontinuing SIPs
SIPs, or Systematic Investment Plans, need no introduction. They are one of the most popular and disciplined ways to invest in mutual funds, offering benefits like rupee cost averaging and the power of compounding to grow wealth over time. SIPs embody the philosophy of “slow and steady wins the race.”
However, many investors fail to see this long-term vision, often canceling their SIPs prematurely. Despite being designed for wealth creation over the long haul, statistics show that 50% of SIPs are discontinued within the first two years, and 81% don’t make it past the fifth year.
Why does this happen? The reasons vary, but they often boil down to wrong expectations and poor financial planning. Investors are lured by recent past returns and enter with unrealistic hopes. They overlook their short-term liquidity needs or get disheartened by temporary market corrections. As a result, they make hasty decisions, cutting short a process that thrives on consistency and time.
Here’s the thing: SIPs are not about timing the market—they’re about staying invested through all market cycles. The true magic of compounding happens when you ride through both the market’s ups and downs. If you quit during a downturn, you miss out on the recovery and the wealth-building potential of the bull markets that follow.
Think of an SIP as a marathon, not a sprint. Stopping halfway because the journey feels tough or the conditions aren’t ideal defeats the purpose. The finish line rewards only those who persist through every challenge along the way.
Once you start a SIP, commit to continue, regardless of market noise. It’s this discipline and patience that create true wealth over time.
3. Unnecessary Borrowing
Managing your cash flow is the cornerstone of any financial plan. Before you even think about investing, you must ensure there are no leakages in your finances. Simply put, you need to invest your surplus, or if there’s no surplus, work on generating it. That starts with understanding your spending patterns and being watchful of unnecessary cash outflows.
However, many fail to do this and resort to borrowing. While loans may offer flexibility, they often place additional pressure on your cash flow. Borrowing, particularly for the wrong reasons, can derail your financial health and is one of the bad money habits.
You Borrow to consume and buy gadgets and fund vacations. To buy Depreciating Assets like vehicles or even to buy big-ticket but flexible purchases like a home.
Sometimes you borrow out of necessity, but often it’s for instant gratification as saving and spending leads to delays in the purchase which you want now. I’ve also seen parents encouraging their children to take loans to fund a house, without exploring alternatives like saving or partial financing. (Read: Buy a House or Invest for Long-term goals- How to decide?)
If you are earning well, you may find yourself repaying the loans easily and purchasing a bigger asset at an early age, but with this, you also sacrifice crucial years of compounding. Your savings in the early years make it easier to achieve financial security in the later years of life. With increasing uncertainties in today’s work environment, relying on the ability to save later is risky.
A balanced approach is key. If borrowing is unavoidable, you may do a mix of savings and loans to fund your purchase, ensuring the debt burden is manageable. Strive to repay the loan as soon as possible without disrupting your savings. Keep doing savings in parallel. (Read: Financial Freedom – A Journey or Responsibility and Minimalism)
Borrow only in cases of genuine necessity, not convenience or vanity. It’s better to save first and spend later than to buy now and pay later.
4. Ignoring Liquidity
Reasonable Safety, Decent Returns, and Liquidity are the 3 main parameters basis which one should select investments. All investments should be backed by a well-thought-out financial plan targeted toward your financial goals and must suit your risk profile.
It may be tempting to invest all your surplus for higher returns, but You should not ignore the Liquidity in your investments and otherwise in your bank accounts. Liquidity ensures you can manage unforeseen situations without disrupting your long-term investment strategy. Maintaining adequate liquidity prevents you from making untimely withdrawals due to poor market performance, taking on unnecessary loans, or calling every financial hiccup an emergency. (Read: Where can you invest your Emergency fund?)
Avoid Investing your complete surplus, save first for Emergencies, your annual expenses, and even short-term important goals. At first, every goal looks important but with limited resources, you have to prioritize the goals and try not to find every answer from your investments.
In fact, by putting money into a process for your goals, you can devote enough time to yourself so you can upgrade yourself which may let you increase your income and thus investing amount.
Liquidity reduces the need to constantly monitor investment performance or react to market volatility. Knowing you have readily available funds provides financial peace of mind, allowing you to stay focused on your long-term goals.
5. Social Media Finfluencers
Social media is teeming with self-proclaimed financial experts, offering “FREE” information that seems too good to ignore. Their expertise often lies not in deep financial research but in how they present their content—keeping you engaged, entertained, and hooked.
What’s the cost of this “free” advice? Your time. These pseudo-experts are skilled at creating bite-sized content that consumes significant chunks of your life. You invest hours watching videos or scrolling through posts from individuals who often lack formal qualifications, certifications, or regulatory registration. Worse, you act on their opinions—making financial decisions that may not align with your unique circumstances.
The hours spent consuming this content could be used more productively. Instead of passively consuming opinions, you could focus on enhancing your professional skills or learning more about structured financial planning.
Understand the difference between spending time and investing time. When you invest time in personal growth, learning, or improving your expertise in your profession, you unlock the potential to earn more money and create real financial stability.
Recognize the value of working with qualified experts. A SEBI Registered Investment Adviser (RIA) offers personalized advice based on your financial goals, circumstances, and risk profile. This professional approach ensures your money works for you, not against you.
Key Takeaway
Don’t let the lure of “free” advice cost you more than you realize. Spending your precious time in search of “FREE Advice” on Social media is also a bad money habit. The time you spend glued to these finfluencers’ channels could be better used to improve your financial literacy, professional skills, or overall productivity. Remember, true financial wellness comes from structured planning, sound advice, and aligning your investments with your goals—not from opinions designed to attract views.
Conclusion: The Road to Financial Wellness
Building wealth is a journey that requires discipline, patience, and a clear understanding of your financial goals. While the allure of quick returns, shortcuts, or “expert” advice may seem tempting, they often lead to costly mistakes and derail your progress.
In the age of information overload, it’s easy to lose focus. But by following a well-thought-out financial plan tailored to your unique needs and risk profile, you can ensure that your money works for you—steadily and securely.
You need to be watchful of your bad money habits. Remember, wealth creation is not a sprint; it’s a marathon. It’s about making informed decisions, staying consistent, and keeping your eyes on the big picture. With the right habits, professional guidance, and a balanced approach, you can achieve financial wellness and peace of mind—one step at a time.
Please share your thoughts and if you want to add more bad money habits, do reply in the comments section.
