Money mistakes are common for everyone no matter which age group you are in. As a matter of fact, if you are yet to establish financial goals which inform your savings plan for growing your wealth, it might be difficult to evade them when you get older.
Saving is closely related to investing and once you figure out the payoff you will get, it becomes easier to prioritize putting aside a certain amount of money for the future. An enabler for this is first identifying your life vision - aligned to what you want to accomplish in life as well as what makes you happy.
In this regard, let us look at some mistakes to avoid and achieve financial independence:
NOT HAVING GOALS
Goals give you a reason to save and stay motivated. If you wish to create wealth, ensure you have a clear picture of what your financial goals are then categorise them as either long term or short term.
These goals could be; your education, wedding, vacation, retirement etc. With such a list, you are able to answer questions such as ‘What are you saving for?’, ‘How much will it cost?’ And when do you need the money by?
NOT HAVING A PLAN
Saving isn’t just about putting money in your bank account or sacco but also finding ways the income will work around your set goals to ensure they are met. It is thus important look at what you can afford with current income and create a saving plan around it. It’s advisable to always set aside 10 to 15 percent of your income, and then spend the rest. However, if you feel this is too high you can go lower but just start.
NO EMERGENCY FUND
It’s unfortunate that in most cases, we wait to put money aside after we have spent on what we think is important. The problem with this reasoning is that you’ll never have money to put aside at any given point. Instead, you should make a plan to first deduct a certain percentage of your income and feed it into the fund to make up for rainy days.
It’s also important to note that this fund should constitute at least six months of your core living expenses and should not be touched for any reason short of a dire emergency.
NOT SAVING FOR RETIREMENT
For many people, saving for retirement is not a priority and they lack the motivation to do so. It’s worth noting, this is a mistake that can have a great consequence on your future particularly when you’re close to desired retirement age.
While it’s not easy to answer the question ’How much will I need in retirement?’ you still need to get ready for it. Scout for avenues you can tap into to grow and invest your savings for retirement such as retirement plans offered by employers, pension plans in the industry etc.
Don’t be in a rush to buy something you have not saved up for in advance. Always have a plan. If there’s something you want to buy, think about it for a week or two. If you still want it after the said period, go back and get it but only if you have the savings for it.
Everyone needs a budget whether you make hundreds of thousands of dollars a year. Budgets help people manage their money better. With a budget, you will know exactly what are your monthly expenses, how much you have to work with, what spending areas need to be evaluated, among other things.
Staying off debt is one of the steps of getting ahead financially. Ensure to record your expenses so as to have an idea of what you spend in a month. Then align this to your income and come up with a workable budget centred on your spending and that limits overspending.
As a result, you are able to cushion yourself from borrowing quick-fix loans offered by loan sharks and mobile lending apps and whose interest rates are ridiculously high.
SNUBBING YOUR HEALTH
We tend to ignore the status of our health and only visit the doctors while sick. What everyone should realise is that by going for regular check-ups, engaging in healthy lifestyle like regular exercise, can potentially prevent ailments and save you a lot of money for treating the same should they arise. Also, take up a policy that will take care of your health related expenses.
Finally, saving money is incredibly important. Mistakes are inevitable and other hurdles such as inflation will be experienced along the way but with a good strategy you are guaranteed of a stress free life.
Additionally, if you are looking toward long or short-term saving, there are various options that you could tap into and make the most of your savings. These include; banks savings accounts, money market funds, unit trusts, bonds, treasury bills etc. Most people who are wealthy today made smart savings and investment decisions merging this with their hard work. You too can define your future starting now!
This article was first published in Business Daily.