Sunday, April 19, 2009


After having completed almost over 6 years in corporate world earning paychecks and living off it, I decided to do a bit of introspection last week and found out that in last 6 years , I have made some grave financial mistakes.I thought of sharing these mistakes with all my readers so that they can learn from them and don't end up making these mistakes themselves.
MISTAKE 1 - Opting for "No PF Deduction"

After I joined my first company ,I was thrilled at the thought of earning a handsome amount of Rs 12000 p.m.(Struggled to get anything better than that in those days after dot com burst). But I was taken aback when the first pay check that I got was for Rs 9800. I was baffled . I wanted to know what happened to the rest. A quick call to the HR and I was told about the various deductions that had eaten up the rest of my money. Eaten up? Yes that's what I felt then, and hence wanted to reclaim my money. So, I found out that there is an option wherein one can choose not to have his Provident Fund deductions out of his salary. off course you have to give a declaration to that effect to your company. I did so, and started enjoying my full salary from next month onwards. It was good while it lasted because it gave instant gratification on every occasion I splurged that extra cash. But, later on I realised that it was a big mistake. Not for nothing, PF deduction is made mandatory, by the Govt Of India. This PF deduction is kind of forced saving for our retirement. And the fact that I did not opt for it meant that I was left with no saving whatsoever after I quit the job. The money which could have gone in the PF fund, would over a period of next 35 years become a huge amount due to compounding effect.I lost out on that opportunity of starting with my retirement fund really early in my life. But, now I can not go back in time and reclaim that money. So my advice to all of you is to never do this with your PF deductions. Infact, if you can , then increase the percentage of PF deductions from minimum 12% to a higher level which you can afford. The more you save in your initial years , the bigger will be your final retirement corpus.

MISTAKE 2 - Buying an insurance policy just to meet a target and then letting it lapse.

I was working with ICICI Prudential and was involved in insurance sales. ICICI Prudential is known as the most aggressive company in the insurance domain in India and as such being in sales meant that we were always under huge pressure to log in more policies than the others. But insurance being insurance, no one wanted to buy it.Now under pressure, sometimes,the sales people buy policies in their own name just to meet the targets. This was counted under their targets which helped them save their skin from the boss's ire and then later on they used to cancel the policy.Cancellation of the policy in the free look period meant getting back almost the whole money back. So it was tactic used by lot of sales people to manage a difficult month in sales. I was always dead against it and never thought of buying a policy on ones own name just to meet the target as the right option. I always believed that you should buy a policy from your own company only if you really need it. But one one such really tough months when sales were not happening , I too fell for this. I convinced myself that I am not buying this policy to meet the number but because I really need it. So I bought the policy for RS 25000 annual premium. And Since I had somehow convinced myself that its a policy that I need it , I didn't cancel it during free look period. Had I cancelled it during free look period of 15 days , I would have got my money back. I continued with the policy for 5 more months and then stopped paying. I stopped because I knew that it was not the policy I needed. It was not worth paying for a ULIP . Result was that I lost my hard earned money in that policy. Had I put the same money in stock markets then,today I would have been sitting with a neat profit of atleast 400% on that. That taught me that one should never buy own company's product just to meet the numbers for your boss.

MISTAKE 3- Not transferring my PF accumulated from my 2nd and 3rd job.

This mistake is the lesser of the earlier two. You all know that in my first job, I didn't have any PF deductions and hence no hassle of transferring my PF money. However, I had PF deductions in my 2nd and 3rd job . But after I quit those respective jobs, I didn't get the money transferred to my new PF account. I have no reason why I didn't do so. Maybe I didn't think it was important enough or maybe I was just too lazy. But the fact is today after so many years I have not yet got the money transferred to my new account.Worse is that I have forgotten details like My employee ID etc of my earlier jobs. I am really at loss to explain this lack of sense of urgency on my part to deal with something which is so very important.But, the good thing is that , I can still reclaim it and get the money transferred. Hopefully will do so now.
I hope you will stay away from these mistakes that I made. If any of you have some thing similar to say , please do share with the fraternity.

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