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Money mistakes to avoid

By Faeza
04 July 2017

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It is never too early or too late to make good financial decisions. However, waiting until it’s later in life comes at a higher price. When you become overindebted, your financial affairs can easily spiral out of control and be left unable to retire comfortably. Nonetheless, by taking charge of the situation you can avoid disaster and keep your financial reputation intact.

THINK ABOUT THE FUTURE IN YOUR 20S

Eunice Sibiya, head of Consumer Education at FNB, says, “Young people should make wise financial decisions early in life.”     She’s mindful that it’s quite common to see young people getting excited about earning a salary and then begin to take on too much debt to buy things they don’t often need, without having made provision for savings.    “There’s nothing as exciting as getting your first salary and realising that earning an income opens up many possibilities. However, this should also be the time to step back and start thinking carefully about your finances,” she says.     “During this stage, every financial commitment should be carefully considered because how you start off will have a direct impact on your finances in the long term.”

FAILING TO BUDGET

Eunice says young people don’t plan or track their spending. She says this can easily be avoided if they start by having a budget.     “A budget can help identify any wasteful spending because it’s designed to help you track your expenses and commit money to areas that take priority. Discipline is important but there’s no harm in making room for entertainment now and then to reward yourself for hard work,” she says.

LIVING BEYOND YOUR MEANS IN YOUR 30S

It is at this stage in life that you want your dream home, get married and start a family. All these things come at a cost. Because you want to impress society, you turn to fall into the trap of wanting to keep up with the Kunenes. She says it’s not always bad to have debt, but it’s important that you can cope with the payments. Eunice suggests that it’s better to take on debt that you can manage.

NOT SAVING

Many people spend their entire salaries and wait for the next payday without putting anything away for a rainy day or retirement. Eunice says the best time to start saving for retirement is in your youth.    “Starting early will most likely help you make building blocks towards a comfortable retirement, ensuring that you benefit from compound interest and keeping in line with the depreciating value of money,” she points out.

THINKING IT’S TOO LATE TO START

Despite the saying that life begins at 40, many people who’ve not saved up for retirement think it’s too late to start at this age. Well, that’s not entirely true because you still have about 20 years to go before retirement. Most of your debts are settled and there’s some cash to put away.    Eunice says it’s important to have an emergency fund. An emergency fund is designed to cover shortfalls when an unexpected expense occurs. A medical emergency or a car breaking down can have a huge impact on your finances.    “The road to financial freedom comes with self-awareness and financial discipline. Arm yourself with as much information, in this way you avoid making mistakes that can possibly compromise your finances in future,” she warns.