Jaineel is in a financially comfortable position. He recently realised that postponing money decisions was making a dent in his long-term goals and has since automated his investments.
However, he is yet to address his inability to stick to payment schedules despite having a comfortable income. This includes credit card payments, utility bills and insurance premiums. Jaineel has taken this lightly till now as he does not see any major impact on his financial situation. Is he right in not taking this aspect seriously?
Jaineel’s history of delayed payments and decisions can affect his financial situation in multiple ways. It will show up in his credit information report and will result in a poor credit score, which in turn will translate into high cost of borrowing and stiffer terms when Jaineel needs to take loans. Rebuilding credit score will take a long time and he should start immediately since his payment delays are not due to shortage of funds but because of the way he deals with his money. The other serious consequence Jaineel may face because of his lax approach towards his finaces is losing insurance protection. If the premiums are not paid or renewed on time, the insurance companies are not liable to provide cover, leaving him open to the risk of shouldering large expenses and his dependents unprotected.
Further, there are costs and penalties that Jaineel will have to bear for the delayed payments and these can add up to quite a sum. He could otherwise use these funds to invest towards his goals or even spending on things he would like to buy. Penalties may also take the form of benefits forfeited. For example, he might lose the benefits of no-claim bonus on general insurance policies and accumulated reward points on cards, depending upon the term of the product. Insurance companies may refuse to provide cover or may expect a higher premium to provide the cover and credit card companies may offer a lower credit limit. All of this will have an impact on his long-term financial situation.
Main Source - Economictimes.Indiatimes
Jaineel needs to replicate his success with automating his investments with his expenses too. He should sign up for the bill payment services provided by banks and register all his service providers, making the payment process easier and thus less likely to be postponed. He should keep his contact details with his service providers updated so that he gets the intimation of dues and he can take timely action. Taking corrective actions immediately will not only protect his current situation but also over time help redeem his past mistakes.