We all make money mistakes especially in our younger years, these habits can be hard to break, so don’t be surprised if you still make some of these mistakes. Financial literacy is a skill that you gain over time. Managing money in the right way is an art! The good news is… anyone can master it!
The key to managing your money is to get into money-saving habits that with time will result in a nice stash of savings in your bank account. To get there, you’ll need to understand the common money mistakes you are making right now, that would lead you to fall at the first hurdle.
Living beyond your means
Keeping up appearances has become the name of the game today, we are all overwhelmed and obsessed with the next new thing, whether that be a fad, trend or an expensive lifestyle hack from the people of social media. The strong feeling of needing to keep up is what leaves most of us in trouble. We end up shopping for items we can’t afford or buy excessive things even if we know we don’t have money for it. Fight this urge, don’t buy the bag! Put the shoes down! Cook for bae instead. It is essential not to make the mistake of buying things that are not affordable to you!
Not saving or investing
To achieve financial independence, it is important to save or invest your money. If you are not doing so, financial freedom may be a far dream. It is essential to save money and invest in the right place such as real estate, bonds, stocks, etc. Some of these options might seem foreign, but take your future into your own hands and find options that work for you.
You need to let your money work for you! Small investments over time can benefit you by compounding and eventually you will see your money grow. Be patient with your savings and know that investing takes time, a good rule to remember is to spend less than you earn. Get control over your money, make a budget, and take small steps towards your financial goals.
Take an active approach when it comes to your spending. Irrespective of the money you make, you must have a budget to control your spending. For example, if you earn KES100,000 a month but spend KES95,000, then you are no better at saving money than a person who earns KES20,000 but spends KES15,000. Living within your means and creating a budget can support you to build positive spending behavior that will be fruitful in the long term.
A budget can help you think about your money critically so you can achieve your financial goals. It will also show you where improvements are required in the course of saving your money.
Borrowing money too often is another common financial mistake anyone can make when in a tight financial situation. If you find yourself constantly needing to borrow money at the end of the month, then this should be a red flag! You should start questioning your financial habits and make changes to your spending habits.
No emergency fund
Putting aside some money for an emergency can be life saving at times! Unexpected events can come up at any moment, saving in daily life is a good practice to have but putting aside sums for emergencies is key! An emergency fund is an account that is used to set aside and save money for times of emergency: for instance, an illness, loss of a job, or a major expense. By putting money aside you can prevent future indebtedness, or hardship in case you are unable to earn.
These small but common money mistakes can at times be the difference between you thriving or being in hardship. Take control of your money today and steer clear of any of the mistakes mentioned above.
Stop making these 5 common money mistakes and achieve financial independence and spend a happy life free of financial stress.