Financial mistakes are inevitable as humans cannot see into the future to know what happens and how to make use of their money. But when you review your financial statement, budget or whatever your expenses are monthly or yearly, you will understand that there are Common Financial Mistakes people make that cost them extra money in day to day life. I will list the six most common financial mistakes and I will explain how to avoid them.
Top 6 most common financial mistakes
- Marrying without sustainable income
- Having kids without financial freedom
- Buying a car by saving money
- Renting a house more than your salary
- Having many kids cost of raising a child
- Putting kids in school that is more than your monthly salary
This will help you stop making financial mistakes that affects your financial freedom and prevents you from becoming rich. These bad financial mistakes should be avoided for anyone who intends to live a financially free life. The biggest financial mistake one can make in my own opinion is marrying when you are not financially free and also getting a divorce without signing prenuptial agreement. This alone can drain all you have worked hard for and you just have to start all over again.
Financial Mistake #1: Marrying without sustainable Income
Marriage comes with so many responsibilities and takes away the freedom you once had that makes you live your life the way you want. Marriage makes you start spending money and increases the burden you will bear. When you marry, you will automatically have 3 families whether you like it or not. 1st is your newly formed family with your wife, 2nd is your own parents family, and 3rd is the family of your wife. When something happens with your mum, if she falls sick, you will be expected to offer your financial help; if your father falls sick, you have to contribute; when your younger siblings have financial problems in school, you have to help them out. This is just from your own Extended family; What happens when your wives mother falls sick and needs your help? What happens if your wive’s sister is in the hospital and needs your help?
Marriage comes with many financial burdens that you should have a sustainable income before you get married.
Financial mistake #2: Having Kids without being Financially Free
When you marry especially in Nigeria, there is this compulsion or pressure from people through their speech and utterances that tend to force you to have kids immediately. Some may make you feel as if you were impotent while others make your wife feels as if she is barren. If you really want to become rich and financially free, then you must be ready to save as early as possible and invest your money before you start having kids. Some people may argue that why did you marry if you do not want to have kids, you know what? It is none of their business. Marriage is not just for having kids. From taking care of your wife by taking her for antenatal care, saving for her delivery and taking care of a newborn baby to growing and nurturing a child, it all takes money and not just small amount of money but huge money. If you do not care about these mentioned things, then you are not yet ready for marriage or even having a kid. A Caesarean Section surgery to remove a kid takes about 250,000 naira in some private hospitals in Nigeria and some may be more than 300,000 in some hospitals; some government teaching hospitals may be still be costly and may be about 50,000 or more. Normal delivery is also very expensive and this is just for delivery of the baby, what about paying for the medical care of the baby as he or she grows; her school, her clothing and feeding? And you know what? About 77% of working class Nigerians earn a monthly salary of less than 40,000 naira. This is the reason why rushing to have kids is a bad financial mistake and most be avoided.
Financial mistake #3: Saving money to buy a car
The only reason you need to save money to buy a car is when you intend using the car for commercial use. If your car is not going to generate more money for you, then you have no reason to save money to buy a car. You should use a single months salary to buy a car, if your single month salary cannot afford to buy the car you want, then you are not qualified to own a car; this may seem abstract or mean to you but it is true. Stop living a life you cannot afford to maintain, your aim should be to save money and invest in order to have multiple streams of income that what you earn per month should be able to buy cars and not just a car; when you cannot let go of your pride of how people will feel when you trek or when you are seen using a public transport, then be ready to live in poverty in few years to come because what you were trying to avoid may catch up with you. You want to buy expensive car that you have to also save money to repair it if it gets damage, is that not a financial mistake you need to stop? Nothing last forever and some jobs are not guaranteed; you may be sacked anytime, what will you do if you have not save and invested? And yet you have a car that you saved money to buy? Your last option would be to sell it.
If your one month salary cannot afford it, then you are not worth it, simple! Increase your income so as to afford it.
Financial mistake #4: Renting a House more than one months salary
Another common mistake people make that cost them extra money in day to day life is renting a house that is more than what they earn per month. Assuming you earn 250,000 naira and yet you live a house of 400,000 naira, then it means you are foolish. What happens when you are not paid for few months? What happens if you are sacked? How are you going to be saving to invest? Rent what you can afford so as to save money to invest in order to earn more and be able to live the life you want. Do not be in a haste to live big.
Financial mistake #5: Having many kids
I have explained this above about the cost of training a child. When you decide to have kids, do not gather a village in the name of giving birth. If a child takes so much money, how much more will having many kids take? You should be able to provide the basic needs of your children and also provide them with the luxuries of life. Your number of kids should be affordable for you in the long run. I prefer having a maximum of 3 or 4 but not more than that. If you have enough money and resources that you can afford more than that, then fine. But do not give birth to children that you cannot put some in school and expect the elder child to take care of the younger ones. Do what you can afford and the same applies with having kids. A lot of children in Nigeria and Africa suffer from Malnutrition such as Kwashiorkor and Marasmus because of the nature of the Families they found themselves in. Do not give birth to children that you end up making them to suffer.
Financial mistake #6: Putting kids in a school that your 1 month salary cannot afford
Just as the principles mentioned above, you should not send children to a school that is expensive more than your one month salary. This is to enable you save and invest. You see, the basic reason for schooling is to learn how to read and write and socialize. A school of a million naira per year is no better than another that teaches well on how to read and write and yet cheaper than the expensive one. If your income can afford the expensive school, no problem; but when you are still struggling with finances, you should focus on providing the best school at a cheap fee.
When you avoid these common financial mistakes, you will notice you now have more to save and invest and you will start increasing your sources of income and then become financially free.