Statement #1: The more you pay the better quality you get.
False. You believe the more expensive the price tag, the better the quality, but that might not always be true. You perhaps pay for easy availability or the ambience for the place you shop at. For instance, the same apparel that is available in the nooks and corners of T Nagar in Chennai, might be showcased at triple the price at a branded store.
Most commodities in your local kirana store will be way cheaper as opposed to the ones you buy at a supermarket. So always shop around for the better deal on price, at least for the products you buy often.
Statement #2: Life insurance doubles up as good investment and everyone needs it.
False. Life insurance is just that. It is for the sake of insuring your life and even that only when there are people who are dependent on you. This should ideally go towards maintaining the same standard of lifestyle that you are providing them, when living.
If you have no dependents or if there is no dire need for a life insurance policy, don't opt for it. Also, never misunderstand it as an instrument for investment. Opt for a pure insurance plan if you must go for one. For investment purposes, there are exclusive investment opportunities.
Statement #3: If you visit a credit counselling centre then you are marked for a bad credit score.
Absolutely false! A credit score is awarded to you depending on how you have maintained your repayment track record and has nothing to do with a counselling session on how to prevent yourself from bloopers on management of funds or generating liquid cash from investments that will help you repay your loans!
Statement #4: If stock prices are crashing, it is a great opportunity to invest.
False. Given the volatility of the market, what is the guarantee that they will not dip further resulting in bad losses for what you invest ?
The downward trend could just be the tip of the iceberg. Sorry to be such a pessimist but when you are investing your hard earned money you need to think twice about every money move, especially so when recession ripples in the global market are felt back here in India.
Statement #5: You need to earn a handsome sum of money to start saving!
False. Whatever your earnings, you can set aside a portion for saving. Simple budgeting, translated as spending lesser than you earn can pave the way to start saving.
If you do not think about saving as early as possible you will lose out on significant sums of money at a later stage in life.
Needs are different from wants, the more you earn, the more you will spend on your wants. Hence, it is best to define your spending patterns early, so that you make a habit of saving.
Statement #6: All your debts perish with you.
False. When a person passes away, their debts will ideally be cleared from the property or movable assets they left behind, the remainder of which would be handed over to the heirs. This includes any property or money the person has bequeathed in his will as well.
In the case of joint bank accounts or co-owned properties that particular person with whom the account is jointly held or property is co-owned, will be held accountable for the payment of the debt.
Statement #7: Being a co-guarantor of a loan has an impact on my credit score.
True. Never readily accept becoming a co-guarantor for somebody else's loan. You are putting yourself at a great credit risk if the person fails to repay the loan.
It will go into your credit records and the bank or financial institution will hold you liable for the repayments the original loan consumer has to make. This could end up being a very sad situation for you and one best avoided.
The author is Head of Content & Research at BankBazaar.com
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