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backAlright, let's be real! Most of us have had moments when we suddenly whip out our calculators halfway through the month and begin 'adding and subtracting'. After seeing a not-so-attractive amount in your bank account, you start to wonder how your money grew wings and flew away.
Though we can blame the difficult economy and societal demands, you can still do your part and make wise choices with your money. If you're ready to step up your financial management game, let's look at five money mistakes you should avoid making this year. Let's go!
Key Takeaways
- Having a SMART (Specific, Measurable, Achievable, Realistic, and Timely) budget is a necessary step to properly manage your finances.
- It's advisable to have at least three months' worth of savings in your emergency fund account, where you can easily access it.
- Avoid spending more than you earn.
- Ensure that you properly understand the debt repayment procedure before taking out a loan.
1. Living Without a Budget
We all know that having a budget is a necessary step in proper money management. But somehow, it often feels like something tedious and only what organized people do. On the contrary, everyone can make a realistic budget (internal link to article on budgeting) and abide by it.
A simple way to start is to list out your monthly income sources and how much you make. Then, subtract your expenses, taxes, bills, and other expenses from your income. You can then go ahead and save a portion, invest another portion, and use what's left for miscellaneous reasons.
2. Overspending and Unnecessary Spending
It's the end of the month, and that glorious sound of an alert sms on your phone boosts your morale and makes you feel on top of the world. You begin to spend on 'drinks with the guys' or go on a shopping spree.
Hold up! It's good to have a good time, but before you think of spending a naira out of your income, ensure that you plan it out well on a budget and set aside your savings and investments.
Spending N2,000 on food orders almost every day of the week may look insignificant. However, these little expenses eventually add up and can leave you stranded in the long run. The keyword phrase here is - do not spend more than you earn.
3. Falling into the Debt Trap
It's a sad reality that most Nigerians have become too comfortable with quick loans. These loans are promised by loan apps that assure instant money in a few taps and oftentimes feel like a lifesaver.
The hidden truth is that the loans can come with high interest that rob you of funds for future financial goals. Before taking out that next loan, ask yourself, 'Do I really need the loan?,' 'Can I rather save to achieve this need?', 'Will this lead to a high interest debt?'
Answering questions like these ensures you only take necessary loans and properly understand the repayment procedures. Remember, loans are never free money.
4. Failing to Invest or Plan for the Future
Not having a clear financial goal is like drifting through life without a clear vision of where to go and what to do next. This ultimately leads to frustration and feeling stranded.
Whether it's real estate, stocks and bonds, retirement packages, etc., investing wisely allows you to combat inflation, achieve long-term security, and achieve peace of mind.
5. No Savings or Emergency Funds
'I didn't see that coming.' Does that sound familiar? Yes, that is the statement that life often leaves a lot of people saying. This is because as days go by, many unexpected issues can arise, such as your car breaking down, a family or friend falling ill, etc.
You need to be a step ahead by having emergency funds in a reliable savings account such as a Moniepoint Personal Banking account. You do not have to make huge deposits at once; rather, your little daily savings can go a long way in building up a nest fund for the rainy days.
Most financial advisors will often tell you to have at least three months of expenses worth of savings in your emergency fund account, where you can easily assess it.
6. Relying on Only One Income Source
It's no news that having just one source of income in today's economy can barely meet your financial needs. Your typical 9-5 income may not make the cut, hence the need to diversify your income source.
From running small side hustles or businesses to making yielding investments, you are sure to pad up your earnings. This way, even if an unfortunate occurrence like a job loss occurs, your extra income can save you from being stranded.
Final Words
What can we take home with this? It's not about being a perfect robot-human; rather, it's all about learning from mistakes and taking action not to repeat them.
You can avoid common money mistakes by not overspending, living within a budget, and building emergency funds.
So, get closer to financial freedom by putting your money in a reliable Moniepoint Personal Savings account. Sign up now to get started.
