Financial blunders women make

Many women seem, on the outset, to be in control of every area of their lives.

They run their homes well and have good careers. However, some of these women are grappling with money problems and have huge debts.

Waceke Nduati-Omanga, a personal finance consultant with Centsible Woman notes that while more women are joining the financial freedom bandwagon, some still slip-up when it comes to finances because of habits that do not support their financial well-being.

Ms Nduati-Omanga, advises women to pay more attention to their money because while money may not buy authentic happiness, it is directly responsible for the quality of life one leads.

“Whether at age 60, you can still afford healthcare depending on how much money you saved and invested when you were working,” she explains.

Some women shared with the Saturday Magazine the financial blunders they have made in the past.

Ann, 36, co-signed a sacco loan for two colleagues at work in 2008. One was laid off a few months later while the other resigned and went underground.

Since the two were not servicing their loans Ann, one of their guarantor, had to make their monthly loan repayments and this completely messed up her finances.

“There was a time I was hardly receiving anything from my payslip and without an alternate source of income, I found it hard to survive,” she says.

Ann adds that the experience made her hesitant about co-signing loans for just any colleague.

While it is not wrong to co-sign loan forms for colleagues, it has to be a relationship in which you know the borrower is not likely to default.

One should be careful about signing a loan form for a person whose financial management skills are not known. This applies similarly when lending money to friends, relatives and colleagues.

Cecilia, 28, loves to shop for clothes and shoes because of the mood boost it gives her.

“I love to buy clothes as a treat. It is especially enjoyable when it is spontaneous as opposed to when I plan for it,” she explains.

Although sometimes Cecilia feels a tinge of guilt after the shopping sprees, she says that the benefits - the warm feeling from treating herself and having something new - outweighs her feelings of guilt.

However, reality usually checks in when she is unable to account for how she used a huge chunk of her salary, yet she has no tangible investments to cushion her from the rough patches of life.

Nduati-Omanga, is herself no stranger to money blunders despite the fact that she is today a financial consultant.

She tells of how she accumulated a lot of credit card debt when she was studying overseas.

“I got caught up in a lot of credit card debt and when I came back, I had to pay for it for three years,” she says.

Ms Nduati-Omanga says that she used the credit cards were fickle things like clothes and shoes, none of which she still has today.

She says that most of these purchases were made after a bad day at work or school in an effort to feel better.

She adds that though many women use retail therapy to ease their hurt feelings, after the initial high, reality sets in because the depressing feeling may not have been eased, yet one will end up with accumulated debts during the shopping spree.

Ms Nduati-Omanga says that many women have a dysfunctional relationship with money, which is seen in the blunders they make with their money. She highlights the financial mistakes women make and how to avoid them.

Bailing out everyone who asks

Ms Nduati-Omanga says that this is one of the most common financial blunders among women, where everyone’s problem becomes the woman’s problem.

“It usually begins with relatives asking for handouts all the time and just because you bailed out a relative one or two times, it becomes an expectation every so often,” she says.

She explains that the cycle is sustained because most women are afraid of confrontation and fear annoying their relatives and friends and so keep giving them handouts.

Bailing out adult children who should have moved out of home is also very common with women.

“If your son is 30, living at home, receiving a regular allowance from you, and driving your car which you fuel for him, you have to ask yourself where you are going wrong.

“The more you continue being his source of income, the less incentive he has to go out and fend for himself. This ensures that he remains dependent when he should be taking care of himself,” she says.

Delegating financial management to someone else

Many women have the mentality that someone else will take care of their money and do not give it the attention they give to everything else in their lives.

Women are good at nurturing their children, running their households and make good managers at work. But they forget to nurture their money.

A lot of women delegate financial management to their husbands, stockbrokers, insurance agents and bankers. They never question their CDS and bank statements or scrutinise their credit card bills.

However, since statistics show that women live longer than men and relationships do not last forever, Ms Nduati-Omanga says that women should take charge of their own finances.

“A woman has to ask herself where she is in terms of how much she is earning and spending, her assets and debts and then equip herself with adequate knowledge to handle her own finances.”

Impulse buying, retail therapy and recreational shopping

According to Ms Nduati-Omanga, many women use shopping as a form of therapy. The feel-good quick fix manifests in the way they spend their money, and shopping becomes an addiction.

“After a bad day, women try to feel better about themselves by spending on items like clothing, shoes, bags and accessories,” she explains.

And because the woman is spending based on the emotions she is experiencing at that particular time, the shopping tends to be spontaneous and without limits. This unbridled shopping causes some women to go into debt.

While some women use shopping to lift their moods after a bad day, for others, shopping is a hobby.

These women will not hesitate to buy shoes, clothes, bags and other accessories from their work-mates who bring new selections to the office every week.

Even if they do not have the money, they would rather take the items on credit and pay for them later – what Ms Nduati-Omanga terms as living on a post-dated cheque.

She says impulse-buying and recreational shopping results from ignorance of the real impact of a woman’s spending habits.

“If a woman realises that buying every item brought to her will mean that she is not going to be able to pay for her children’s education or retire until she is 80, then she will be more cautious about her spending.”

Ms Nduati-Omanga says that during personal finance workshops for women, she asks them to list the things they value and channel their spending towards those goals.

“For instance, a woman may say she values a holiday with her children every year, yet she finds it hard to accomplish that goal.

“The same woman will tell you she spends Sh300 on lunch every day and when you do the math for her, this in diligence adds up to Sh72,000 at the end of the year.

“So I tell her your lunch is your holiday and ask her if she would rather have her coffee, lunch and shopping spree or go on holiday with her children,” Ms Nduati-Omanga says.

Keeping up appearances

Another financial stumbling block for women is trying to keep up appearances with their peers.

A woman compares herself with her female colleagues, relatives and friends and feels that because another woman is driving a certain car and wearing certain clothes, she also has to be in the same league or even better.

Ms Nduati-Omanga says that is one of the reasons many women to go into debt as they try to fund a lifestyle that may be beyond their means.

Women play nice and modest at work and in business

Ms Nduati-Omanga says that unlike men, women find it hard to recognise when they have become good at what they do.

They put themselves up for sale and find it hard to charge their services for what they are worth.

“Initially, offering a service for free or at a subsidised cost can help you build your name and career, but at some point, it has to stop.

“Women have to realise that they have built value in themselves, have the education and skills and ask for value commensurate with their expertise, just like men do,” she advises.

Another area where Ms Nduati-Omanga has noticed women sell themselves short is when it comes to investing.

She says that women either play it safe or go for investments that attract the masses such as shares, stocks and unit trusts.

However, she says that playing safe does not help because it slows down their chances of accumulating wealth.

“No one ever created wealth because they had a huge unit trust portfolio. Those who got wealthy went to Kitengela, bought land, got other people together and put up property.

“To accumulate wealth, women have to be aggressive in investing and they should realise that it is not about the amount of money one has - but rather a frame of mind that is keen on creating wealth,” Ms Nduati-Omanga explains.

Making emotional money decisions

Ms Nduati-Omanga finds that women mix emotions with money especially in investment groups.

“If some of the women in an investment group have a fight, that may be reason enough for some women to pull out of the group, yet men would never do that,” she says.

Ms Nduati-Omanga explains that men realise that the group has nothing to do with the quarrel they have and will therefore not jeopardise the investment vehicle they have established because they had a fight.

The feuding men may agree not to talk beyond the investment group but keep the group intact. As for women, a tiff that has nothing to do with the group could lead to the group breaking up.

“Women let their emotions override the sensible decision which in this case would be to stay in the group, continue investing and build a portfolio,” she explains.

Playing catch-up

This is especially true for women in their 40s who realise that they did not make any investments earlier in their career.

They now realise that they need some money to sustain their current lifestyle after retirement and this leads them to buy any investment being offered to them out of panic.

Such women may take loans to invest without taking the time to do research on the investment options best suited for them, because they feel like they are out of time.

Spending money on assets that are not in their names

Ms Nduati-Omanga says she has seen women who live with men they are not married to, take a loan to buy property in the man’s name.

She strongly advises women against such decisions, which she says, do not work to the woman’s advantage.

“Do not spend money on assets that are not in your name and where you have no security,” she cautions.