The Worst Financial Mistakes And How To Avoid Them (Part 1)

Recently, I had a discussion with a group of fellow millennials about how well they’d been able to manage their personal finances and from their responses, they had made their share of financial mistakes and some of them were pretty lucky not to have made the big ones.

I’ve made my share of financial mistakes too and at the end of those discussions, I made sure to explain to them that it is absolutely normal to make these financial mistakes because nobody is perfect. The most important thing is to learn from them and grow.

giphy

Personal Finance Management isn’t taught in our high schools, universities, colleges or polytechnics; so we have to teach ourselves. It is okay if we find ourselves making wrong financial decisions; what is not okay is not learning from our missteps. I would be addressing the worst financial mistakes we can make and how we can avoid them.

Remember: No one is perfect and I believe that everyone can start to build up their finances better, regardless of the past.

“If you’re saving, you’re succeeding” 
― Steve Burkholder

Not Saving                                                                                                              

We are back to this topic and I am glad we treated this in the last article. You have to understand that if you are not saving, you are not making any financial progress and so the sooner you start, the more you can invest and grow.

It takes discipline
It takes discipline

Another principle to ensure proper saving habit which you can also follow is the ‘’50, 20, 30’’ Rule of allocating your income. I find this rule very interesting and I’m sure most of you would to.

You try to allocate 50% or less to your necessities like rent, transportation, clothes, light bills etc. 20% should be set aside for your savings or investment and the last 30% can be allocated towards things you enjoy; like going to the movies, restaurants, parties or gadgets.

Overspending

Many of us are guilty of this and the funny thing is, some of us do not even know when we overspend. Overspending could be on little things that we end up not accounting for and when added up, it sums up to a lot and this can ruin our finances or it could be on big things that are not of necessity at that particular period. Our wants are insatiable and due to this, we tend to lose interest in what we have, thereby desiring new or improved items.

overspending-in-december

How can we deal with this? Set up a budget or a plan and stick to it. This might seem hard, but consider it a challenge and set an hour or 30 minutes to build a proper budget. It could be a daily, weekly or  monthly budget.

Purchasing Under Desperation

This happens when you wait till you are in dire need of an item before you make a purchase. It is a huge financial mistake and it comes with big regrets.

tenor

Let’s consider a personal example:

I wanted to rent a house in Ikoyi, Lagos State because I was desperately in need of an accommodation at that time. I was willing to take the house I got at an amount above my budget and also below standard. In short, I was so desperate that I overlooked certain faults that I would ordinarily not accept. I was lucky to escape this because an alternative came along the way and this gave me room to plan ahead. If I had taken the accommodation, the cost of maintaining that house over the long run would be more than the money paid for rent considering the state of the house.

I honestly don’t want you to be in this situation. To avoid this:

  • You have to constantly try to plan ahead before you buy, if not, you could find yourself buying items like cars, phones, wedding rings, laptops etc. at very expensive rates and they end up not being what you want after the purchase.
  • You should also think of the aftermath of purchases before making a decision.
  • Stay away from impulse purchases.

Which of these mistakes can you relate to? What are the financial mistakes that you’ve made? How did you recover from them? Let me know in the comments section!

The concluding part of this post will be out next week, so come back and read it. In the mean time, if you haven’t, read last week’s post here.

Until next time,

Tolu

Happy Economist

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10 thoughts on “The Worst Financial Mistakes And How To Avoid Them (Part 1)

Add yours

    1. I am glad you liked it Tolu. You can remove the 10% from the 50% or 30%. Last week, I talked about other ways to save, you can save based on your circumstance or financial goal also. Pick the one convenient for you and make wise decisions. 🙂

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  1. Another great piece. Waiting anxiously for the concluding part. Love the aspect cautioning against panic or impulsive purchases. Keep enlightening us Tolu.

    Like

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