We have all been at our lowest financially at one time in our lives. During this time, we always swear to be financially disciplined once our financial situation changes. Yet once we regain our financial muscle, we forget and go back to our old spending habits.
These money mistakes are costly and we all know that. They make it impossible for us to save money or increase our savings.
Let’s look at some of the 10 common money mistakes that we should completely avoid.
- Avoid impulse buying
This goes without saying that impulse buying is going to make you always exceed your budget. Always stick to your budget and list of purchases. One major reason for impulse buying is buying something just because it’s on sale. Sale or not, if it was not in your budget, it is IMPULSE buying and no amount of justification can change that.
- Avoid group shopping
Ever noticed that when shopping with your friends you always end up spending more money instead. Picture this, you leave home determined that you are going to buy only one dress, you get to the boutique and you start trying on different dresses. Your friends keep complimenting you on how the different dresses look good on you. Hours later you leave the store with 4 dresses! Imagine the extra amount spent. That’s what peer pressure does to your money.
- Avoid shopping on an empty stomach
I have heard of this a couple of times and it never hits home until I walk into a supermarket hungry. At that moment, it feels as though you can literally eat the whole world and you pick any eatable thing you see which you will probably not eat after being full. The lesson here is, don’t shop for foodstuff when you are hungry because you will over-shop.
- Stretching our expenses after a raise
Why is it that when we get a raise, all over sudden our car is not functioning well, our once big house is now so squeezed or we suddenly feel we need to take a vacation every 3 months yet a month before the raise we were comfortable and income fit just well. This is such a bad attitude. Our lifestyles do not need to be adjusted upwards but our savings should be.
- Spending more than we earn
If you do not want to go to an early grave, only spend what your earnings can afford. Do not try to live for people; do not be lied to by social media to live lavishly in order to fit in. Live only within your means and if possible way below your means so that you can have money to save for rainy days.
- Getting in unnecessary debts
The most irritating debts are these small debts that have no basis really. Like buying clothes from a friend on credit payable at the end of the month. Or borrowing money to contribute to a baby shower or to buy a dress to attend a friend of a friend’s wedding. Who does that? Many people I know. And unfortunately, I have been one of these people too. I always felt the need to promote my friend’s business and ended up taking stuff on credit to be paid once my salary hits the account. The results were that I was always on a cycle of small debts. These small debts ate up into my monthly budget and I had to forgo my savings each month to cater for them. You can imagine a year of that, what damage it does to your financial goals.
- Not tracking our expenses
Spending carelessly without a care to know what you spend on is not only careless but very dangerous to your wallet. How do you then track your spending? There are countless free expenditure tracking apps online. You can also do it physically by collecting your receipts and transaction messages and analyzing them whether daily, weekly or monthly. Tracking your expenses will help you know where you spend most, least and where you need to cut down on or even increase on your budget allocation.
- Living without a budget
And here comes the mother of all saving mistakes, operating without a budget. I know many people do not have a written budget. And if they do, they do not follow it. Why? I would also love to know why.
A budget helps you to control your expenses and know how much you spend. As simple as that. And controlling your expenditure will help you a great deal save money. Compare two scenarios, Mathew who earns 80k a month has no budget and spends as he wishes but at the end of the month, he has saved nothing complaining that expenses just keep coming up. Kevin earns 40k and strictly adheres to his budget of 30k a month, the rest of the 10k he saves in his Sacco and emergency fund equally. Kevin agrees that expenses crop up here and there but how he manages is that if his budget does not allow he pushes the expense to the following month. Of course, unless it’s an emergency.
Now, between Kevin and Mathew, who is financially wise?
- Not having an emergency fund
Over 60% of people do not have an emergency fund to fall back on in case of an emergency. And this is true going by the number of people who end up borrowing from friends and family when an emergency of a mere 100k comes up. Clear evidence is how immediate people downgrade their lifestyle once they lose their jobs. Having an emergency fund comes through when such cases arise; they cushion you from financial stress. Especially with kids, an emergency fund is vital. Your emergency fund should at least be able to cover you for almost a year in case you lost your sources of income.
- Not doing a price comparison
Why is price comparison important? Because items cost different in different shops and even different locations. In Kenya for instance, prices change with the neighborhood and the street. Why pay extra just because of where you live or where you choose to shop from? Always do window shopping before making any purchases, that is what I am trying to say. Even comparing between brands is a money saving tip. The same Smart TV could have a big price difference yet the features are the same and they both offer a year of warranty. My advice, don’t go for brand names, go for functionality.
Knowing where you go wrong with your saving will help you amend your ways and put more into your savings. The journey to financial freedom is not smooth sailing for sure but it is rewarding in the long run and so it is worth making the sacrifice now.