The retirement stage in life is the time when you don’t have to take unnecessary risks and you have control over your financial health. But what if you have made financial mistakes several years before you retired? For example, choosing the wrong financial tools which stick around you even after your retirement. They can make your retirement life difficult. So, here are some financial instruments that you should try to avoid if you want a better retirement life.
Traditional Insurance Plans
A traditional insurance plan comes with a life risk cover benefit along with maturity proceed. The premiums on traditional insurance plans are usually higher than the term plan for a similar size of risk cover. Return on investment offered by such plans is usually much lower than other low-risk options available in the market such as compared to bank FDs or small saving schemes.
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When planning for your retirement, you must keep your insurance and investment needs separate. Buying traditional insurance for your retirement can keep you underinsured and fetch you a much lower return on investment than other investment avenues.
Using A Credit Card For Withdrawing Cash
Cash withdrawn from credit cards is one of the most expensive ways of getting money when you are in need. The question is, should you use this option? The answer is, that you may use this option when all other doors are closed. Try options like borrowing from friends and relatives, getting secured or unsecured loans from the banks, selling some of your assets, liquidating your investments, etc.
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It’s important to maintain sufficient contingency funds to avoid such situations where you have to withdraw money using your credit card. The cost of withdrawing money from your credit card is very high and you also lose the free credit period on your credit card till the utilised credit limit is repaid. A delay in repayment of the utilised credit limit can spoil your credit score and disturb your other loan instruments as well.
BNPL For Shopping
Buy Now, Pay Later (BNPL) is a financial tool for buying a product on loan and repaying the amount later on through equated monthly installments (EMIs). BNPL facility is extended by the merchant in a tie-up with the lending institutions. It is important to spend money on shopping in sync with your budget and spending requirements. BNPL often lures buyers to spend over and above their spending capacity and suffer later on.
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It is important to restrict your spending habits according to your financial capacity. Changing your lifestyle and spending habits close to your retirement can make your retirement corpus fall short of achieving your retirement plan.
If you are close to your retirement, try to avoid experimenting with your financial habits, lifestyle and financial plan. Stick to your original retirement plan and cut down on financial risks as much as possible.
The author is an independent financial journalist
