You just received a check from the bank of Mum and Dad, boo of life or your business. Hurray!
You are pretty excited. Here comes your friends, chatting and ready to have some fun. It is easy to spend what is in your hand fast especially since you promised the next pizza outing is on you. Slowing, you run out of cash and you wonder how you ended up broke, trapped and feeling miserable.
Here are mistakes that got you in this position.
1. Leaving beyond your means/Keeping up with the Joneses.
A lot of young people are keeping up with the Joneses what they fail to realize is that the Joneses are broke. Social media does not make it any easier. People are constantly showing off and trying to outdo each other. Young women are buying expensive bags, hair and shoes that they cannot afford. Young men are buying engagement rings that they can’t afford. Most couples and their parents find themselves in debt after lavish weddings that they can’t afford. The key phrase here is they can’t afford.
2. Not understanding debt: Good debt versus bad debt.
Young people do not realize that there is bad debt and there is good debt. It is not advisable to purchase a car via a loan due to the fact that a car is not regarded as an asset. Once you drive out of the car store, the value of the car depreciates. Also credit cards accrue the highest rate of interest and should be avoided as much as possible. It is reasonable to borrow money to further your education or buy a home. Debt should be avoided as much as possible.
3. Deals & Discounts – bargain hunting. Young people do not take advantage of bargains or discounts. A lot of money can be saved through deals or discounts.
4. Lack of budgeting: A lot of young people do not live on a budget. Most people don’t know how to budget. A budget is a blue print for achieving specific goals. In simple terms, it is a list of your likely income and expenses for a given period. Kindly check my blog for articles on budgeting.
5. Do not have an emergency fund:
A lot of people do not have emergency funds. An emergency fund is an account that is used to set aside funds to be used in an emergency, such as a loss of a job, an illness or a major expense. Typically financial planners recommend that your emergency fund should be able to cover at least 3-6 months of living expenses. A vital point is that an emergency fund reduces the need to use high interest debt, such as credit cards as a last resort. Life happens it is better to be prepared than to be sorry. The truth is that everyone has an emergency fund; the difference is that you are either earning interest or paying interest.
6. Do not understand that it is the little things cause the biggest problems:
People fail to realize that it is the little things that often cause the biggest problems. Eating out once in a while may not cause a dent in your finances, however, eating-out every day, throughout the year, may prevent you from potential earnings from savings as a result of eating at home.
AUTHOR
Omilola Oshikoya is Africa’s premier wealth coach with over 12 years’ experience in finance and Investment banking. Omilola’s goal is to inspire this generation to live the Richer Life & to help eradicate poverty in Africa through a tool she created called “The Hand of Wealth”, which focuses on five areas, what true wealth is, how to create wealth, how to manage &grow wealth &how to use wealth. She does this through two of her brands, “Do It Afraid & PocketFinance”. She is the author of the Richer Woman.
