CA REVEALS 9 FINANCIAL HABITS SILENTLY KILLING YOUR WEALTH — AND HOW TO FIX THEM

Many people face the situation in their lives when they stay cash poor despite earning well. The reason is that they spend what they earn. They hardly think about investing, or if they start it, they begin late, only to lose important years of compounding. High-interest loans, purchasing things under societal pressure and making wrong investment choices aggravate the problem further. In a social media post on X (formerly Twitter), chartered accountant Nitin Kaushik highlights 9 financial mistakes that most people make without even realising and suggests ways to avoid them.

1. Mixing insurance with investment

Whole life or endowment plans sound comforting — “safety + returns” — but they do neither well.

A plain term plan protects your family.

Mutual funds grow your wealth.

Pure term insurance + mutual funds often outperform them — both in protection and growth.

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2. Co-signing someone else’s loan

It feels kind-hearted in the moment.

But if they miss a payment, their credit score takes a hit.

Generosity with money should never come with a legal signature attached.

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3. Paying only the ‘minimum due’ on credit cards

This one is a silent wealth killer.

Rs 50,000 unpaid can balloon to over Rs 1 lakh in just two years at a 36% interest.

That’s not a credit card — it’s a time bomb.

Chartered accountant Foram Naik Sheth – KMP, Wealth Management Solutions, NPV Associates LLP, says that overreliance on loans and credit cards leads to high interest payments and late penalties and creates debt pressure.

"One missed EMI drops your CIBIL score, raising future borrowing costs and trapping you in a debt cycle," says Sheth.

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4. Pay in full, or not at all

Investing in what you don’t understand

Crypto, NFTs, or some 'guaranteed' scheme your friend swears by.

If you can’t explain in one sentence how it makes money — you’re not investing, you’re guessing.

Curiosity is free. Confusion is costly.

Sheth says that investment decisions based on tips and fear of missing out (FOMO) traps lead to poor financial decisions.

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5. Spending more just because you earn more

It’s easy to call it a 'reward', but lifestyle creep is real.

A Rs 2 lakh salary with Rs 2 lakh expenses = Rs 0 peace of mind.

You don’t get rich by earning more — you get rich by keeping more.

Sheth says that in current times many people mistake the visible display of wealth for financial success. In this quest, they spend all they earn, saving nothing.

"Lifestyle inflation, the constant urge to upgrade and match a certain lifestyle, has surged in recent years. Many people mistake the visible display of wealth for financial success. In this quest, they spend all they earn and save nothing. To put it in perspective, an Rs 1 lakh invested instead of spent on a luxury watch can grow to nearly Rs 10 lakh in 20 years at a 12% return," says Sheth.

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6. Buying a brand-new car on loan

It feels great for the first month… and painful for the next 60 EMIs.

A car loses nearly 20% of its value the day it leaves the showroom.

Buy when you can afford it comfortably, not emotionally.

7. Going all-in on one thing

Diversification isn’t fancy jargon; it’s survival.

Put your eggs in different baskets — stocks, debt, real estate, gold.

A good portfolio grows even when one part falls.

Wealth builds quietly through balance, not adrenaline.

8. Home loans that eat up half your income

Everyone dreams of owning a house — and that’s fine.

But if your EMI is 40–50% of your salary, that house owns you.

Keep it under 25%. Freedom is worth more than a square foot.

Sheth says, "Owning a home is a dream for many, but taking a large home loan too early can be financially restrictive. High EMIs eat into savings, reduce liquidity, and limit career flexibility."

9. The worst trap — payday or instant loans

They promise “quick help” but come with 40–50% annual interest.

It’s like borrowing from your future self… at a massive premium.

If you need one, pause and rebuild your budget. The loan isn’t the fix — the discipline is.

Sheth also suggests following 7 money habits that can help one generate wealth.

1. Create an emergency fund of at least 6 months of expenses.
2. Buy a pure term insurance plan of at least 10X of annual income. Avoid ULIPs or endowment plans.
3. Get comprehensive health cover.
4. Cap your lifestyle expense to a certain percentage of income. Follow the 50-30-20 rule. 50% - needs, 30% - wants and 20% - savings.
5. Pay credit card dues on time every month.
6. Define your goals. Invest through SIPs. Take help from a qualified financial advisor for your investments.
7. Buy a home after you achieve financial stability and can keep EMIs below 30-35% of income.