Top common money mistakes that people make
When it comes to money, most people make money mistakes that lead them into a never-ending cycle of financial difficulties. Being money-wise and making better money moves will guarantee financial freedom and the pressures of getting into debt. What not to do with your money is more important than what you do with it.
Are you facing financial difficulties? Here are the 10 major money don’ts to avoid economic hardships.
1. Rushing to buy a house
There is a lot of pressure when it comes to building a home, buying a house or renting. Hit a certain age and the questions you get are have you bought land, built a house. Home ownership is a big part of the Kenyan dream and you are not considered as settled if you are still renting. While sometimes it makes sense to own a house, buying before you are financially ready is a disaster. Investing the extra money in projects that will grow your savings will ensure that when you do buy a home, it will be your dream home since you won’t be dealing with debts.
2. Buying a new car or leasing one
Being infatuated with new cars is not healthy for your financial situation. Cars are sold every other day to buyers who cannot afford to pay for them in cash. Most Kenyans are caught in the loop of taking loans to buy a car which is a depreciating asset. While this may seem light on the surface, what it means is that you end up paying more money for the car than its original value unlike those people who can afford to buy in cash.
Buying a used car have it benefits but it may mean more trips to the garage. And while at it, leasing a car is a big no, leasing means putting money into years’ worth of car payments yet have nothing to show for when the term is over.
If it takes more than three years to pay off the car value then it means it’s out of your range.
3. Excessive spending, Want vs. Need.
We only live once, right? It’s in our human nature to want to impress others, we end buying things we do not need or cannot afford to show people that we are well off. Going to fancy restaurants to buy overpriced coffee or splurging on expensive alcohol every weekend is a want not a need. Fortunes are lost one shilling at a time, every purchase that you makes add up to drain your savings.
If you are going through financial difficulties avoid frivolous spending, after all spending money that you may not have to impress people means shallow relationships that will leave you emotionally and financially stressed. Spend wisely and enjoy your financial freedom.
The next time you are buying something, weigh on whether it is something you need such as medication and food. If it is something you want like some Nyama Choma and ordering another round for the boys then walk away, you will be surprised at how much you are able to save months down the line.
4. The cycle that is salary advance
Most households are living paycheck to paycheck meaning that when a financial emergency crops up it turns into debt since there is nothing to fall back on. The bigger part of employed people will not be able to stay without a job or survive a missed paycheck, this is one of the worst situations you can find yourself in especially in the Kenyan economy right now where most businesses are closing down.
It is money wise to keep three months’ worth of expenses in an account you can access quickly if need be. In case of loss of job, this will give you time to get your situation in order without losing your house or being kicked out.
5. Don’t co-sign a loan
We have found ourselves in situations where we might need a loan. When your family or friends asks you to co-sign a loan the first thing we want to do is say yes and help them out. For the sake of your financial health and credit score ratings, saying No is the right response since it essentially means saying yes to your financial freedom.
Situations and circumstances change, being legally responsible for someone’s debt is not a situation you want to find yourself. Co-signing a loan has been the source of many family disputes and ends of friendships.
6. Don’t live on borrowed money
Credit cards have become the norm even when it comes to buying essentials like groceries and gas, things that will be long gone before the bills are even paid in full. Using Credit card means incurring interest rate that ends up increasing the buying price of the items purchased. You are likely to spend more than you earn with Constant use of your Credit card or paying for the purchases even four times over.
Debt is the bondage that is keeping you from attaining financial freedom. Not all debts are bad like mortgages and student loans because of their low interest rates. Part of not living on borrowed money is not letting your debts linger, the longer you postpone paying your credit balances the more money you are bound to lose
7. Invest and save
Your money should be working for you or you will always be working for money. Besides having a savings accounts, contributing monthly to your retirement account will give you a financial cushion. Do not invest in something because it is trendy or cool, investing for the wrong reasons can lead to a quick downfall.
Consult a financial advisor that you can help you make better investment decisions. Pick a financial adviser you can trust and do not put blind faith in them, everyone has their own best interest a heart.
Don’t say it is impossible to save either, most people complain of not having extra money left over to save monthly. To attain financial success, you need to evaluate your spending habits and ensure that you squeeze some money into your savings every month.
Bottom line
Steering yourself from the possibility of financial ruin is not hard. Start by monitoring your spending habits, ask yourself if you really need that fancy gym membership, TV cable or music services. Be keen before taking a loan to buy things that cannot repay the debt. Finally, create a financial plan or budget that you can stick with every month will guarantee a future without the constant worry and burdens of debts