Personal Finance Mistakes That Cost You Lakhs – Fix Them Now

Are your small money mistakes quietly costing you ₹1,00,000 or more yearly? If you're like most Indians, chances are they are. 

From ignoring inflation to underestimating your credit card bill, these are not rare accidents. They are habits. And they quietly destroy your financial life. Let’s fix them today.

Stop Playing Small With Health Insurance

You're wrong if you think your ₹5,00,000 health insurance is enough. Medical inflation in India is growing like wild grass. Treatment costs have doubled in just a few years. A single heart surgery can cost ₹30,00,000 in metro cities.

Most people take health insurance just to save on taxes. That’s not planning. That’s just wishful thinking. When you fall sick, the hospital doesn’t care about your tax deduction. They want their bill paid.

You must buy a cover of at least ₹1 crore. Buy a super top-up if needed. Go with trusted insurers who settle claims.

Example:

In the ICU, you don’t want to compare term sheet clauses. Fix this mistake now. It’s about protection, not just paperwork.

Your Tax Filing Can Cost You ₹1,50,000 If You Are Careless.

Most salaried people trust someone else to file their taxes, but that can backfire badly. A small mismatch, a missed proof, or using the wrong ITR form can cost thousands.

Let’s say you claimed home loan interest under Section 24 but forgot to declare the loan in the right section. If picked for scrutiny, you’ll get a tax demand with penalties. These things are not rare. And income tax officers won’t wait for your CA to respond.

Mistakes That Hurt:

• Claiming wrong deductions
• Not declaring capital gains
• Using outdated bank details

Fix It:

• Use a trusted platform like ClearTax or TaxBuddy
• Don’t file in the last minute
• Review Form 26AS and AIS before submitting

Tax filing is not a small task. It needs your eyes, not just your signature.

You Are Losing ₹10,00,000 Every Year to Inflation.

Inflation is that slow poison. You don’t feel it till your savings start shrinking. A flat you bought for ₹1 crore five years ago may now need ₹1.5 crore to replace. But your bank FD still gives just 6% returns.

Let’s say you have ₹50,00,000 sitting in savings account. With 6% return and 7% inflation, your money loses ₹50,000 in value yearly.

To beat inflation, you need to invest in the right assets:

• Equity Mutual Funds (10-12% average annual returns)
• Real Estate (appreciation + rent)
• Gold (hedge but not core)

Example Table:

Don’t hoard. Invest. Inflation does not wait. It eats while you sleep.

EMIs and Credit Cards: The Silent Wallet Killers

Using credit cards is not a sin, but misusing them is. Most Indians don’t even know their credit cards charge 36% interest when a minimum amount is paid. That’s not a payment plan, it’s a trap.

You spent ₹1,00,000 on a new phone and some trips. You pay just ₹5,000 per month. Repaying it will take you over two years and cost nearly ₹1,40,000 with interest.

Traps To Avoid:

• Paying the minimum amount
• Taking a loan against a credit card
• Overusing Buy Now Pay Later apps

Better Options:

• Pay the full bill before the due date
• Use debit cards for big expenses
• Switch to low-interest personal loans if urgent

Debt is not always bad. But unmanaged debt can destroy your financial base.

Investing Without Thinking Can Burn You Bad

Many first-time investors act like gamblers. They invest based on tips, social media, trending stocks, or what friends say. No plan, no research. That’s how people lose ₹5,00,000 in crypto or F&O trading in one year.

Investment is not thrilling. It is patience. You will always work for money if your money doesn’t make money.

Stick to strategies like:

• SIP in index funds
• Asset allocation (Equity + Debt + Gold)
• Value averaging

Don’t invest based on excitement. Use logic.

Money grows when you stop treating it like a lottery ticket.

Conclusion

Most people don’t realise how small money mistakes can become big losses. A missed tax proof, a short health cover, or blindly following a stock tip may initially seem harmless. But they can easily cost you ₹1,00,000 or more every year.

The good news is that all of these mistakes are fixable. You don’t need to be a finance expert. You just need to take smart, simple steps — like reviewing your insurance, filing your taxes carefully, investing with a plan, and staying away from bad loans.

Start with one change today. Fix just one mistake. Then keep going. Over time, your money will work better, harder, and smarter for you.

FAQs

1. What is the best way to save if I earn under ₹50,000/month?
Start with SIPs in mutual funds. Use a budgeting app like Walnut or ET Money. Prioritise the emergency fund first.

2. Should I close my credit card to improve my CIBIL score?
No. Pay bills on time instead. Closing cards can reduce your credit age and harm your score.

3. How much term insurance is ideal for someone earning ₹6,00,000/year?
You should have 15- 20x your income. So ₹1-1.2 crore at minimum.

4. Is gold still a good investment in 2025?
Gold is not great for returns. Use it for wealth protection, not growth. Don’t invest more than 10% ofyour  portfolio.

5. Can I claim rent if I live with my parents?
Yes, if you pay rent to your parents and they declare it as income, keep receipts. Use HRA to claim.
 

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About the Author

LoansJagat Team

‘Simplify Finance for Everyone.’ This is the common goal of our team, as we try to explain any topic with relatable examples. From personal to business finance, managing EMIs to becoming debt-free, we do extensive research on each and every parameter, so you don’t have to. Scroll up and have a look at what 15+ years of experience in the BFSI sector looks like.