# Things you should never do with your money

Source: https://koshex.com/blog/17-things-you-should-never-do-with-your-money · Published 13 November 2023 · 8 min read

The things you should never do with your money are the ones that leave you with no cushion or with costly debt. They include spending your salary before saving, going without emergency money, carrying a credit card balance, and investing money you need soon. Each has a simple fix.

## Key takeaways

- A credit card is interest-free only if you pay the whole bill by the due date, and paying less loses the interest-free period.
- If you stand as guarantor, the loan shows on your credit report, and a missed payment by the borrower can lower your score.
- On 4 June 2024 the NIFTY 50 index closed 5.93% below its 3 June close; ₹2,00,000 tracking it would have shown about ₹11,860 less.
- No RBI-regulated lender may charge for prepaying a floating-rate loan to an individual for non-business purposes, however old the loan.
- For card, prepaid wallet or UPI recurring payments, RBI requires 24 hours' notice before each debit, and you can withdraw the e-mandate any time.

## What should you never do with your money?

Never spend before you save, never go without emergency money, and never borrow or invest in a way you do not understand. Below are twelve specific things you should never do with your money, each with what it costs and what to do instead.

## Which money mistakes cost people the most?

The costliest are the ones that turn into debt or force you to sell something at a bad time.

### Mistake 1: never spend your whole salary before you save

The fix is to decide the saving first and move it out when the salary arrives, then spend the rest. [10 ways to save money from your salary](https://koshex.com/blog/10-best-ways-to-save-money) walks through how.

### Mistake 2: never go without emergency money

An emergency fund is money kept aside for sudden costs such as a job loss or a hospital bill. Without one, a sudden expense can force you to sell investments when prices are low, or make you stop your SIP, a fixed amount invested at regular intervals, usually monthly.

[Where to keep your emergency savings](https://koshex.com/blog/where-should-you-keep-your-emergency-savings) puts it at three to six months of expenses. Keep it somewhere you can reach quickly. A mutual fund, a pool of money from many people invested by a professional manager under SEBI rules, pays out within three working days of the redemption date.

### Mistake 3: never carry a credit card balance from month to month

A credit card is interest-free only if you pay the whole bill by the due date. Pay less, even the minimum, and you lose the interest-free period. Interest then runs from the date of each purchase on what is still unpaid.

RBI says every bill must warn that paying only the minimum stretches repayment over months or years. A late fee, or a report of the card as overdue to the credit bureaus, can come only once payment is more than three days past the due date. The fee may be charged only on the unpaid amount, not on the whole bill. A credit bureau is a company registered with RBI that keeps credit records.

[How to get out of a debt trap](https://koshex.com/blog/5-steps-to-get-out-of-a-debt-trap) helps if a balance is building. [What a credit score is](https://koshex.com/blog/credit-score) shows why late payments matter.

### Mistake 4: never buy on a deal or a "no-cost EMI" you could not pay for in full

An EMI, short for equated monthly instalment, is the same payment made every month until a loan is cleared, part interest and part loan. A "no-cost EMI" on a card usually still carries interest; the shop or bank covers it with a discount of the same size. RBI's card rules make the issuer show the split (principal, interest and that discount) before the purchase is converted, and again on the statement. If you would still pay interest after that discount, the plan cannot be called no-cost. A processing fee, a charge for setting up the loan, can sit on top, so read the split first.

A pay-later plan at checkout is credit too. RBI's digital lending directions say short-term credit or deferred payment offered over a merchant platform must be reported to credit bureaus. So it can show on your credit report like any other loan.

[How to stop impulse buying](https://koshex.com/blog/what-are-5-ways-you-can-stop-impulse-buying) has ways to slow that moment down.

### Mistake 5: never stand as guarantor for a loan you could not repay yourself

A guarantor is a person who agrees to repay if the borrower does not. RBI's directions for credit bureaus say a credit report must show the loans a person holds as borrower, co-borrower or guarantor. In plain terms: if you stand guarantor, the loan shows on your report, and a missed payment by the borrower can lower your score.

TransUnion CIBIL, one of the credit bureaus, says in its FAQ that a guarantor "is equally responsible to ensure the repayment of the loan". It adds that any default by the principal applicant "will affect your Credit Score as well". Sign only if you could carry the full loan yourself.

### Mistake 6: never put money you need soon into shares

An index is a list of companies picked by fixed rules, such as the 50 in the NIFTY 50.

Suppose ₹2,00,000 set aside for a flat's registration, due later that week, sat in something that tracked the NIFTY 50 price index. The index closed at 23,263.90 on 3 June 2024 and at 21,884.50 on 4 June 2024, a fall of 5.93%. On that close, the ₹2,00,000 would have shown about ₹11,860 less. This is an illustration on a price index, with no costs or tax.

The index did recover quickly. Its first close above the 3 June level was 23,290.15 on 7 June 2024, three trading days after the fall. A bill due that week would still have been paid at the lower value. Other falls have lasted months. [Short-term investing](https://koshex.com/blog/looking-to-invest-for-the-short-term-heres-how-to-do-it) explains where such money can wait.

### Mistake 7: never invest on a tip or a promise of high returns

SEBI is the Securities and Exchange Board of India, the market regulator. It warns that "investments or opportunities promising unrealistically high returns can be indicators of investment scams".

Since August 2024, SEBI has barred the brokers, fund houses and other firms it regulates from working with certain people. These are people who give investment advice or claim returns without SEBI's permission. A tip from someone who is not SEBI-registered comes with no protection. [How to protect yourself from bad financial advice online](https://koshex.com/blog/how-can-i-protect-myself-from-bad-financial-advice-on-the-internet) covers the warning signs.

### Mistake 8: never sell in a panic when markets fall

SEBI's investor site says: "A smart investor will not panic and sell their investments when the market takes a downturn. Instead, they will stay calm and focus on their long-term goals."

[Should you redeem your funds when the markets are down?](https://koshex.com/blog/should-i-redeem-my-funds-since-the-markets-are-down) looks at that decision. [The behavioural biases investors must avoid](https://koshex.com/blog/common-behavioural-biases-investors-must-avoid) covers the urge to sell.

### Mistake 9: never share your OTP or UPI PIN

An OTP is the one-time password sent to your phone to approve a transaction. UPI is the phone-based system for instant payments from a bank account. A UPI PIN is the PIN that approves a payment from your account. Each one approves a payment, so neither goes to a caller, a "bank officer" or anyone else. Do not send money to a caller who asks for it either.

[How to protect yourself from online and banking fraud](https://koshex.com/blog/how-to-protect-yourself-from-financial-fraud) covers what to do if something goes wrong.

### Mistake 10: never sign a loan or card agreement you have not read

Take prepayment, meaning paying a loan off early. No RBI-regulated lender may charge for prepaying a floating-rate loan to an individual for non-business purposes, however old the loan is. A floating rate is one that can change during the loan.

On other loans, including a fixed-rate one, the charge, if any, is the lender's own policy. In RBI's terms a fixed rate is fixed for the whole term of the loan. For these loans, the charge is the one written in your sanction letter, loan agreement and Key Facts Statement, the lender's summary of the loan's terms and charges. A charge not disclosed there cannot be taken. Read them before you sign.

Credit cards have their own rules. A card application comes with what RBI's card rules call a one-page "Key Fact Statement", a similar summary for the card. A charge can change only for the future, and only after at least one month's notice.

### Mistake 11: never ignore bills and auto-debits

An e-mandate is a standing instruction, registered once, for recurring payments from your card, prepaid wallet or UPI.

For these, RBI's rule is that the bank or card issuer must notify you at least 24 hours before the actual debit. You can opt out of a particular transaction or of the e-mandate itself, and you can withdraw an e-mandate at any point. For a UPI AutoPay mandate, you can see all your active mandates in any UPI app, and you can revoke or pause them there. Read each month's bank and card statement for debits you did not expect.

### Mistake 12: never lock away money you may need

A post office 5-year time deposit cannot be closed before four years from the date of deposit have been completed. An ELSS fund has a lock-in, a period in which you cannot sell at all. It is three years from each purchase.

A property has no lock-in, but it cannot be sold quickly at a fair price. [Is buying a house really an investment?](https://koshex.com/blog/is-buying-a-house-really-an-investment) goes further.

## How do you fix a money mistake you have already made?

First stop it growing, then rebuild your buffer, then review.

Start with the debt that costs the most in interest, such as unpaid card dues once the interest-free period is lost. [What is a debt trap, and how do you get out of one?](https://koshex.com/blog/5-steps-to-get-out-of-a-debt-trap) sets out the steps. A home loan is a separate trade-off, and [prepay your home loan or invest](https://koshex.com/blog/prepay-home-loan-or-invest) covers it.

Next, rebuild emergency money, then set your saving to move out automatically on the day your salary arrives. Last, review once a month. [How to manage your money](https://koshex.com/blog/the-ultimate-guide-to-money-management) shows a way to run that review.

If the mistake was starting late, start now. Compounding means earnings that themselves start earning, and it works over time. [The power of compounding](https://koshex.com/blog/power-of-compounding-meaning-benefits-working) explains how.

## Frequently asked questions

### What are the biggest money mistakes to avoid?

The things you should never do with your money are the ones that leave you with no cushion or with costly debt. They include spending your salary before saving, going without emergency money, carrying a credit card balance, and investing money you need soon. A credit card is interest-free only if you pay the whole bill by the due date. Each mistake in this article has a fix.

### Is it better to keep money in a bank account or as cash?

A bank account, because deposit insurance covers it and cash earns nothing. DICGC, the RBI-owned body that insures bank deposits, covers up to ₹5,00,000 per depositor per bank, principal and interest together. As one example, SBI's savings account rate was 2.50% a year from 15 June 2025, credited quarterly.

### What should I do with extra money sitting in my account?

Set aside emergency money first. Our guide to where to keep your emergency savings puts it at three to six months of expenses. Then sort the rest by when you will need it, because money due soon should not sit in shares. Our guide to saving vs investing explains how to tell which one a goal needs.

### Which debt should I pay off first?

Start with the debt that costs the most in interest. Unpaid credit card dues are one example once the interest-free period is lost. A card is interest-free only if you pay the whole bill by the due date. A home loan is a separate decision, with its own trade-off between prepaying and investing.

### Is it a mistake to invest in only one company's shares?

It concentrates the risk: one company's troubles hit the whole sum you put in it. A mutual fund spreads the money across many holdings by design. It is a pool of money from many people, invested by a professional manager under SEBI rules.

### Can I cancel an auto-debit I no longer want?

Yes, for a recurring payment set up on a card, prepaid wallet or UPI. Under RBI's e-mandate rule, you can withdraw the mandate at any point of time, and you can opt out of a particular transaction. The bank or card issuer must notify you at least 24 hours before each debit. For UPI AutoPay, all active mandates show in any UPI app, where you can revoke or pause them.

*This article explains how things work; it is not advice to buy or sell any investment. Mutual fund investments are subject to market risks, read all scheme related documents carefully.*