Let me make this point as clear as possible: This article is called How to Ruin Your Financial Life for a reason: If you follow the rules in it, you will ruin your financial life. If you do the opposite, sunny days lie ahead.

Without further ado, here are the rules. I’m positive that I’ve probably missed some ways in which you can ruin your financial life—maybe even some important ones—but let’s just get on with it. My motto, borrowed from the genius editor Jim Bellows, applies here in spades: “Begin at once, and do the best you can.”

20 Financial Pitfalls to Avoid (or How to Ruin Your Financial Life)

1. Forget about tomorrow

That’s right. It’s always today. Tomorrow will never come at all, so don’t make any plans for the future. Making plans is a lot of work, and thinking about the future is frightening. It’s a lot easier to just think about today.

Plans for the future involve calculations and variables and may require some form of self-discipline—yuck. Plus, there’s so much uncertainty about the future that sometimes you don’t really feel good when you think about it. So why think about it at all? It’s just a way to get prematurely gray. Instead, think about what fun you can have now, and how much enjoyment and spending you can cram into one day.

2. Know with certainty that there will never be any rainy days in your life

There’s a lot of talk among old people about saving for a rainy day. There could be a recession, or a new inflation or deflation, or a real-estate collapse, they’ll say. You could lose your job. It happened to them after all. That’s why, they’ll tell you, you need to put aside money for a “rainy day.”

The only problem with this admonition is that it doesn’t apply to you. There will be no rainy days in your life. And if you plan for them, then you will have penalized yourself by saving money, and not splurging on that vacation or new car you wanted.

Just go on with your life knowing that all is fundamentally well, and that the bad things that happened to other people in other eras will simply never happen to you. It’s that basic. You don’t need to make any plans for economic security because your life will never have any downs, only ups.

3. Don’t bother to learn anything at all about investing

Life is short—far too short to spend your free time reading some dusty old tome on investing your money. Who does that kind of thing anyway? Nerds and worrywarts, and goofy guys with Coke-bottle glasses and pens in their pockets. You’re far too cool to even think of poring over books with charts and graphs and explanations of why stocks are sometimes better than bonds, and bonds are sometimes better than stocks. Who needs that kind of stuff?

4. Don’t balance your checkbook or keep track of what you spend

Why should you? The bank will send you a little form if you’re overdrawn, won’t they? In the meantime, you’ll want to avoid that uncomfortable feeling of being hemmed in by lots of numbers and columns of figures, and instead, just do what’s fun and easy.

After all, you’re not a machine.You can’t be programmed to function like a human calculator. You need to be your own sweet, carefree self. Besides, if you keep track of how much you spend, it might depress you.

So please don’t do it.

5. Forget to pay your taxes

Why does the government need the money anyway? They already have trillions. And they have legions of employees and office buildings, and lots of aircraft carriers and submarines. They do not need your few measly pennies. They don’t care about you.
If the tax guys somehow track you down, demanding the money you owe them, then borrow a line from the immortal Steve Martin and say, “Hey, I forgot.” What can they do? It’s not like you’re an ax murderer. You simply “forgot” [wink, wink] to pay your taxes. If you have your taxes deducted from your pay check, take the maximum number of deductions you can. Then, when it comes close to April 15, just don’t file your income taxes at all, period. That way you get to keep all of that extra money that wasn’t withheld from your pay check. It’ll take years, maybe decades for the tax guys to catch up with you. And when they do, at most they’ll just smack your hand and give you a big frown.

An added bonus: If you do get involved with litigating against the government over back taxes, you’ll be amazed by how little tax lawyers charge. These attorneys will practically give away their services to you, and the fees and expenses can be comically low.

Try it. You’ll see. The tax guys really just want to be loved, same as you and me.

6. Truly believe that you’re only as valuable as what you own

Look, this is between you and me, right? It’s not as if anyone can read your mind and know what you’re thinking. So, just between us, even though you’re overweight, have a lousy job, and are miserable in your relationship, you know how to make yourself feel empowered, don’t you? You know how to build your self-esteem. You know that the way to feel like a superhero is to buy the right things so you can feel great about yourself.

You may have heard that happiness is an inside job. Baloney! Happiness comes from getting and spending. Happiness comes from piling up boxes and boxes of things you’ll never use. Tommy Hilfiger, Von Dutch, Kate Spade, Armani, Gucci, Hermès, Mercedes-Benz, Ritz Carlton—brands and labels are what matter, not self-esteem and a hard day’s work or having loyal friends.

You’re a nobody—in your own eyes and in the eyes of others—unless you buy and own every cool product and service out there…and don’t you forget it.

7. Repeat after me: “I am not responsible for my financial wellbeing”

Well, why should you take on that responsibility? That would involve [again] a good deal of self-restraint, self-discipline, and abstinence when it comes to buying everything you’ve always wanted. If you were responsible for your own finances, then you’d have to sit down with a calculator and a pad of paper and figure out what you could no longer afford. And that means that you might have to deny yourself on occasion.

Well, that’s just plain wrong and shouldn’t happen!

It’s never your fault what happens to you, and you shouldn’t have to discipline yourself—not now or ever. What kind of life would that be? A “fun” life? A life like you see in Vogue or Esquire? I don’t think so, do you?

Responsibility about money is for nerds and geeks. You’re a hippie, a free spirit, not an accountant. So do whatever you feel like doing, and let someone else worry about it.

8. If getting your finances together seems too difficult at any given time, turn everything over to a financial/ business manager who will have total control over your money

My advice is to find some trustworthy person who claims to be well versed in money management, go to her office with your check book and a power of attorney, and turn everything over to her. In this world, you can only trust a few select people with your money, but you’ll unerringly find the right one. A suggestion? Go for the one who charges the most. Don’t be happy with anyone who charges you less than 5 percent. Maybe even pay a few percentage points more for quality service.

Then, just send all your bills to her and have her pay them, let her withdraw money from your accounts for investments, and generally allow her to do everything but the heavy lifting. And don’t feel lazy for doing it. Many busy, important people like you have better things to do than worry about stuffy old money matters.

You may have heard those horror stories about financial managers who looted their clients mainly because these folks were too lazy to pay any attention to their financial statements. Pay no attention to any of this at all. It will never happen to you. There will never be a day of reckoning for trusting your future to someone whose interests might totally differ from yours and who might have the ethics of a snake.

9. Don’t think about retirement—it’s a l-o-o-n-n-g way off

The truth is [and you really need to remember this], that you’re young and vibrant no matter how old you might happen to be right now. You might be 20 or you might be 40 or you might be 60, but you’re still light years away from retirement. In fact, it’s so far down the road that you can’t even see it. And you know what? You never will be able to see it!

First, you won’t ever get old. Second, you won’t ever have to worry about money. And third, someone else will always take care of you. It’s all too boring to even think about it, so don’t. Plus, it’s really fun to be old and not have any money. It gives you the opportunity for fantasy and invention and trying new things…like poverty.

Retirement? Yawn. It just takes care of itself.

But what if someone has talked you into worrying about money? What if some fool has made you believe that you should invest in stocks or bonds? But let me give you a few words of advice if you’ve actually started to begin some kind of investment plan. This is important, so listen up…

10. Choose a broker based on his [or her] good looks, fashion sense, and gift of gab

That’s the way to choose a stockbroker! If your broker’s a looker, is nattily attired, and is in the finance business, he’s obviously made a ton of money for himself…and probably for his clients, too. That means he’ll make a lot of money for you as well, and then you’ll also find yourself hobnobbing at The Polo Club and The Yacht Club and those other places where he hangs out.

The world of finance is a tricky, complex world, so what you want is someone who’s smooth-talking and confident. Your broker has to be able to convince you that he can do great things with your money by putting it in junk bonds and other areas too arcane for you to know about personally.

But please don’t make the mistake of asking your broker [or potential broker]—just what kind of education he has. Similarly, it would be rude and tasteless to ask him to give you references from satisfied clients. All you need to see is that he’s wearing an Armani suit, a Rolex, and Gucci shoes—and then you can breathe a sigh of relief because you know that your hard-earned money will be in good hands.

11. Convince yourself that you can beat the market without knowing anything about it

What, after all, does someone like you even have to know about the market? The nerds and geeks may have graduate degrees. Some money managers may have decades of experience. Some pundits like Warren Buffett may have an abundance of both. But you have your innate gambler’s luck and feel—the only cards you’ll ever need. You can tell just by the way you get out of bed in the morning in which direction the market is headed. You don’t need a system or education or information gleaned from late hours of study—you have that feeling in your fingertips. Call it instinct, call it luck, or call it by its rightful name: genius. You can forecast the market by just the feeling in your bones.

Economics? Marketing? Research on business cycles or specific industries? Nonsense! Just by hearing a company’s name you can tell if it’s a winner or a loser.

Don’t be a slave to some musty old library or some ponderous old computer. Just plunk down your money right this minute based on pure intuition.

This is definitely the way to play the market, and your way is the best way.

12. Don’t keep records

No record keeping for you! That’s for librarians and bookkeepers and hermits. And anyway, since you’re never going to have a financial plan and are never going to need money for retirement, why would you need to keep records?

When that time comes when the tax guys ask for your records for the last five years, just tell them that you’re not a clerk and you don’t have no wicked records, man! They’ll understand.

Plus, if your broker makes a mistake and you don’t have the records to prove she’s wrong, so what? The tax guys will just take your word for it. Just have another cocktail and another buffalo chicken wing and soon you won’t even remember that it’s almost tax time—oh, but that’s right, you don’t pay taxes. Ah, life is good!

13. Don’t worry about buying stocks when there’s a bubble going on—you’ll always know when to sell out just before the bubble bursts

There are a lot of old-fashioned measurements that tell old fogeys when stocks are cheap and when they’re expensive by historic measurements. These are ways to calculate the ratio of the stock’s price with respect to its earnings and dividends. When these get really, really high—when stocks are flying—those measurements are really high, too, and some curmudgeons call those times “bubbles” and tell you to stay away from buying stocks then.

What nonsense that is! When stocks are high-flyin’, that’s when it’s most fun to be in the stock market! How much fun is it to invest when stocks barely move at all, or at most, a few percent a year? It’s BO-RING.

So, why listen to the old creeps who tell you to beware when the stock market is at those levels? Why even pay a moment’s attention? If, in fact, the bubble is bound to burst, you’ll know about it and get out in plenty of time.

Uh, how will you know? Well, hasn’t Warren Buffett said that in a bubble, everyone says they’ll leave the party at midnight, only there are no clocks in the room? Yes, but so what? You don’t invest based on clocks and old fuddy-duddy rules. You invest by the intuitive feelings in your fingertips, and those feelings will also tell you when—exactly when—to sell, take your profits, and go hand out at Cap d’ Antibes.

14. Make sure you never hold your financial adviser or broker accountable—you want him to be your friend

There are measurements that come out regularly in Barron’s, The Wall Street Journal, and many other fine financial publications about how well the stock market has done in the past six months, the past year, or the past five years. They track broad market indexes like the S&P 500 and the Dow Jones 30 Industrials.

Please don’t make your financial adviser’s life difficult by comparing his picks and suggestions with this broad gauge. You only need to know that he’s your pal, that he takes your calls promptly, and basically, that’s it. If he’s a friend to you, talks to you, reassures you, and maybe occasionally takes you to lunch and picks up the tab, you know he’s your kind of guy. Don’t make him feel bad if other measurements are going up faster than your investments. He’s a nice family man with a good personality. That’s enough.

15. Start a business with inadequate capital—in a difficult field and in a difficult location—and expect to prosper

This essay could just as well be called “Open a Restaurant,” which is surely one of the best ways on earth to lose a ton of money, your spouse, and your peace of mind. But don’t let that thought worry you. No, forget what I just wrote. I was just kidding.

But, seriously, why don’t you open a restaurant in an area where millions of other people have started eateries that went out of business. Go ahead. It’ll be fine. Where everyone else—even people with experience—went down the tubes, you’ll succeed just because of your innate charisma.

So, start a restaurant—or any business where the failure rate is 90 percent or more—and you’ll be amazed to see how easy and fun it is and how much money you make. You won’t need to worry about burning through all your cash in a few months and being overwhelmed by debt. Nope, not you—‘cause you won’t make the same mistakes others made. You know better.

16. If taking charge of your financial life seems overwhelming now, just put it off for a few more years

There’s this old myth that says you should get movin’ right now on accomplishing your goals, because the more time you have to work on them, the more likely you are to attain them. And then there’s some old saw about how a journey is more likely to get finished if you start early in the morning.

What a load of bull! Didn’t the idiots who came up with those maxims realize how much fun it is to sleep late?

It takes a lot of mental effort to take charge of your finances. If it seems a bit burdensome right now, just wait a while until it seems like it would be less of a bother. Only when you’re really and truly up to it should you get yourself in gear to make plans for your financial future. Don’t worry about the time that passed while you were getting yourself organized. I’m sure it was good for something—if only for sleeping late, you movie star, you!

17. Believe that you can get rich quick—that you can get something for nothing

There are such things as free lunches! This one is so obvious that I don’t think I need to say much about it. It’s simply a statement of truth that a smart guy or gal like you was born knowing.

Basically, real riches appear overnight just by luck or chance or a bolt of inspiration. You don’t need to trade experience or labor or investments for wealth. If you’re on the right track, you’ll reap the financial rewards overnight…money will rain down on your house in torrents. Let me explain this a little further…

18. Know without a doubt that you don’t have to work hard—you only need to find an angle

Hard work gets you nowhere slowly. It’s for those without imagination. But you are different. You have that creative spark. You have that special magic that’s going to make you wake up one morning at 4 A.M., shout out, “Eureka!” and have the brainstorm that will bring you staggering wealth.

So don’t bother to work hard. Just take a lot of naps and wait for that flash of lightning to explode in your brain. The world is waiting breathlessly for you to come down from the mountaintop with your two tablets and your inspiration that will make the Ten Commandments seem comically insignificant.

Go for it. You just need that one clever angle.

19. Feel confident that you can borrow your way out of any problem

You know how I’ve been telling you over and over that you don’t need to save money? Well, some of you [who haven’t been listening very well] may have had a sneaking little thought enter your minds: What if I suddenly need money? How will I handle it if I don’t have any money saved up?

Good question, and it has a good answer: You borrow the money when you need it by getting a cash advance on your credit cards. Or go to a finance company and get a signature loan. And here’s a sneaky little tip: There are also special friends out there who will want to lend you money. Don’t even think about being too embarrassed to ask for a loan—or worrying about your buddies’ discomfort over being asked. Just ask for it—in fact, even demand it! What are friends for? They’ve probably been boring and practical enough to save, so what’s the point of saving if not to do nice things for other people? So, go for it.

And here’s another word of advice: When you get that borrowed money, don’t repay it. Think about it for a moment. How are you any better if you borrow a thousand bucks and then a few weeks later repay a thousand bucks? You’re in exactly the same position you were before. But if you borrow the thousand and then don’t repay it, or only repay a little of it, you’ve made a profit! It’s like it was a gift. So, borrow, allow your pals to feel good about helping you out, and then go on your merry way.

20. Don’t bother to provide for your spouse or your children

Don’t bother sacrificing one single thing for your kids or your spouse so that they’ll be better off or well provided for when you die. What will it mean to you? You’ll be dead anyway. Why should you have to sacrifice a trip or a new boat to buy insurance for your family? It’s all about you, you, you, anyway, and once you’re gone, the world ends, too. What possible concern could it be of yours that your spouse or kids might have to scrimp and save when you’re gone? They’re only your flesh and blood.

What about setting up accounts for your kids so they can pay for college or make a down payment on a home? No way. There are scholarships. There are student loans and jobs. Or they can go without college. It might do them good to go out and work right after high school. Why coddle them with money when you could have so much more fun coddling yourself?

So basically, just devote your life to thinking about your own wants and needs, and let the chips fall where they may.

Well, all right then. If you’ve read this far, it’s just possible that you have some idea what you’re doing wrong. Let me assure you that if you just keep on doing what you’re doing, things will only get worse. I’ve said it before and I’ll say it again: “If nothing changes, nothing changes.”

The post 20 Financial Pitfalls to Avoid appeared first on Complete Wellbeing.

Most people today end up taking advice from several different people and hence end up with so many unnecessary and irrelevant products. Some people are completely fascinated or fixated by the gold or platinum tag their private bank allocates them. They believe that just because they are gold clients, they get the best and customised advice that is possible, and more importantly that their advice is free. I recently came across an intelligent person who said, “I am a Gold client of this bank. They have allocated a relationship manager specifically for my account. I am being taken care of on a regular basis. Besides, they don’t charge a fee and have given me a financial plan”.

When I saw the financial plan this gentleman had received, it was just a canned copy printed directly from a software. All the relationship manager had to do was sit for an hour with the person, tick off boxes spread over 6 – 8 pages and the financial plan was done. This gentleman was given a printout of this after 3 – 4 days to show some additional work was done and that was it.

There was no detailed analysis, no thought given to the overall financial goals and strategy, and no effort that was put in by the relationship manager to create a sound financial plan. There was nothing mentioned about what to do with existing insurance, investment and loans. There was no debt strategy, no estate planning exercise, and no real estate strategy. The ultimate objective was to sell some irrelevant unit-linked insurance plans and proprietary investments that were not required at all. I told him, “This is not a financial plan and this is not how you should be taking advice.”

What is then the correct way to get advice?

The correct approach is to create a comprehensive written strategy that would cover every aspect of personal finance for you. In short, there is a pressing need to take a holistic view of your overall situation. There should be one person or a team who takes stock of your cashflows, assets, liabilities, liquidity needs and helps you firm up your financial goals. What is the point of having several lakh earning 4 per cent when you are paying a loan with an interest cost of 16 per cent? What is the point of having several properties, if there are no inflows from them or there are severe negative cashflows for the properties? What is the point of having life insurance if you are severely under-insured despite paying huge premiums?

Just as an infection to your liver can spread across other key organs, similarly a decision in one area of finance impacts another and your overall financial situation. It is very important that people understand this and make prudent decisions.

The first and key decision that you must make is to select a good financial advisor. If you think you are capable enough of making money decisions on your own, great. Even then, a good financial advisor can prove effective and efficient in managing your overall finances. But, if you do strongly believe that you do not need any, then you should be able to spend enough time to understand several areas of personal finance, changing economic trends, products and options suitable for you. Finally, you should implement the strategies that you have devised for debt management, risk management and insurance, asset allocation and investments, tax planning, retirement planning and estate planning in a timely manner. For others who believe that they could benefit from sound financial advice, you must at least understand the basic parameters on how you would choose a financial advisor/planner.

How should you choose a Financial Advisor/Planner?

A lot of agents, financial distributors and banks try to call themselves financial advisors or planners. They generously also use the term financial planning/wealth management as and when it pleases them. Consumers are naturally confused about the various terminologies used and hence do not actually question what a particular designation means. If you ask a person whom he would go to advice for [of these two titles] given a choice, Certified Financial Advisor or Certified Senior Financial & Investment Specialist [CSFIS], 95 per cent of the time, he will opt for CSFIS. Incidentally, both these certifications are fake.

I was talking to a journalist friend the other day and he asked me what questions a person should ask a financial planner. I told him that more than the person asking the financial planner, what is far more important is the questions the financial planner asks you.

First: How detailed and comprehensive was the data-gathering interview?

This is one of the most important steps in the financial planning process and will drive all the advice to be given. Was the data gathering comprehensive enough? Did the financial planner make notes of the information that you did not have and ask you to get back with this information? Did he take in information about you, your family, your aspirations, dreams, goals, income, expenses, cashflows, assets, liabilities, insurance, investments, tax situation, wills, powers of attorneys and information that might be relevant? Did he ask about your behaviour towards risks and how you react in bullish and bearish situations? Did he understand the mistakes that you have committed in the past and how were they committed?

A good financial planner should take anywhere between 3 – 5 hours including a social chat over 1 or 2 sessions to complete this data gathering process. He will then review the data collected and revert to the client for more clarifications to make sure he has understood the overall scenario well.

This first step itself is the single biggest clue. I find that most people genuinely interested in financial planning are keen to understand how their financial decisions will affect their life, much more than how certain products work or how to get the highest returns. In fact, the biggest value-add of a good advisor is how he utilises his skills to better understand the client’s overall situation and emotional issues and how best he handles the overall picture.

A salesman on the other hand will ignore most of the issues like estate planning, debt and cashflow management and be only interested in how much money you have to invest and how much insurance can be sold. Another category of sales people will just focus on how their scheme will make you rich, save tax for you and give you the highest returns. This is the most dangerous category and should be avoided completely.

Second: Look closely at how the planner discusses risks and returns with you.

Does he promise you the moon and tells you how good he is and that he has provided the highest returns? No good financial planner in his sane mind will ever do so and this is the kind of person you should look at working with. Does he take you through a proper risk profiling exercise, and tell you that the long-term return of the stock market is around 12 –15 per cent and therefore one should not believe theories of 30 per cent returns?

Third: Don’t look at the bank brand and opt blindly for advice, as the bank is not going to advise, it is the advisor that does. Most relationship managers in banks are primarily sales people always on the lookout for selling more products to clients. They frequently change employers so a relationship manager at Bank A can tomorrow be at Bank B and then at Bank C.

Fourth: Does the financial planner take you through estate planning matters, retirement planning, different offerings, as might be suitable to you, and any other issues? He might not deal directly in any of those things but most good planners will at least give you an overview of what you need and refer you to someone competent. Finally, the composition and presentation of financial plans can vary immensely. The groups most notorious for doing rudimentary financial planning or misusing financial planning are banks and big distributor of financial products. I told a person, “If you ever want to insult a good financial planner tell him that his plan was as good as the one you got from your bank’s financial planner!”

Most of the private banks and distributors have a well-deserved reputation for first selling life insurance as investments and churning portfolios under the garb of financial planning.

As a popular business anchor says on television, “Would you go to a chef for a haircut, or a barber for food advice? Then why go to the wrong person for advice?” The problem today in the financial services industry is that you don’t know who the barber or chef is because everyone uses the same title or name. Make sure you understand the terms financial planner, financial planning, wealth management and wealth manager, and that you are not just getting a lemon in the name of financial planning.

Who should be on your team?

Several key members should be a part of your team.

Chartered Accountant [CA]: Having a good CA on your team is absolutely necessary. CAs today provide help on several areas such as bookkeeping [day-to-day accounting], preparing and filing returns; tax audit, tax planning advice, project finance and so on. Understand that they are professionals and expect to be compensated in a fair manner. Do not cut corners by just thinking about costs. In fact, most times the advice that you will receive will be a function of the fees that you pay.

Banker: People are likely to have a high amount of loans. Having a good relationship with a banker could mean preferential treatment and rates on loans and other deposit products. This is also a function of your account size with the bank. If you are unhappy with your bank or if your bank has not acted in your best interests, move on to some other bank.

Public Sector Banks are likely to give you loans at a much lower cost than private sector banks. Although the infrastructure might not be so great and documentation could take time, the savings that you will make over a period of 10 – 20 years is likely to compensate for the initial inconvenience.

Financial Advisor/Financial planner: We’ve already discussed this in detail above. This is again one of the key decisions a person should make. The key requirements here are someone acting in your best interests, his integrity and his skill in creating customised solutions for you.

Real Estate Agent: Considering that you are likely to own several pieces of real estate, make sure you have an ethical broker with you who does not just show you some properties but also objectively tells you appropriate prices and gets you the best deals. He should be conversant with the paperwork required, do appropriate due diligence and constantly keep abreast of real estate happenings in the area. You might also want to consider real estate consulting firms, if the ticket size of your real estate is sizeable [above ` 5 – 10 crore].

Insurance Agent: Most people think of life insurance as an investment and as a means to save tax. At the same time, they think of general insurance as a pure cost. Hence, most people are inadequately insured [low covers], have the wrong set of policies with them and are paying a huge premium. You must get the risk transfer piece of your financial planning process right. Your Financial Planner can help you arrive at the quantum of cover you must take for every financial risk that you are exposed to. A good insurance agent will help you implement action items as detailed out by the Financial planner and regularly service you with updates, premium collection, submission and receipts.

Lawyer: There are several areas, where most people, require legal help. Considering a person’s real estate exposure, it is very important that a real estate lawyer vets all your property-related documents right from title of the property to preparing the legal buy or sell document. Additionally, lawyers can create the leave and license document for you and other paperwork that could be needed. Many people bypass lawyers by letting the real estate agent handle the real estate paperwork. It would always be beneficial that you double-check all pieces of paperwork with a lawyer specialising in real estate. Another area where a lawyer will be of immense value will be is estate planning. A competent lawyer can handle creation of wills, power of attorney and trusts.

Excerpted with permission from The only Financial Planning Book that you will ever need, by Amar Pandit, Network 18 Publication Pvt. Ltd. INR 499

This was first published in the April 2013 issue of Complete Wellbeing.

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