5 bad habits to avoid when you start earning your own money

By Richard van Rensburg
03 July 2017

Money mistakes we're all guilty of making...

Making smart financial choices early in your career can give you a head start in life.

July is National Savings Month, which focuses on cultivating a much-needed savings culture among South Africans, says Gerald Mwandiambira, acting CEO of the South African Savings Institute (Sasi).

“South Africans generally don’t have a savings pool for emergencies and tend to dip into their retirement funds in times of crisis.”

Eunice Sibiya, head of consumer education at FNB, says, “There’s nothing as exciting as getting your first salary along with the realisation that an income creates many new opportunities. But it’s important to think carefully about your finances and what you want to achieve now that you’re earning your own money.

“At this stage it’s important to consider every financial commitment carefully because how you start out has a direct impact on your finances in the long run.”

Use the month of July as an exercise in learning how to control your expenditure and how to live well and truly within your means, says Wikus Olivier, a debt management expert from DebtSafe.

Watch out for these bad habits that could ruin your financial future:

1. No budget:

A budget is crucial as it helps you identify unnecessary spending and to plan properly, Sibiya says. This way you can keep track of everything you spend and allocate funds to key areas.

When drawing up your budget you need to separate your “needs” from your “wants”, Olivier says. Especially if you’re having a tough month, revise your shopping list and take off the “wants”. “If you really want something, put it on the ‘save for’ list of your budget . . .” he says. Sibiya adds that self-discipline is the key.

2. You think enjoying yourself means you have to spend money:

Sometimes relaxing doesn’t have to cost a cent, Olivier says. “How about rearranging your furniture if you’re the type who likes to have everything in place?” he suggests. Or movie buffs could start a swop club with their friends.

It’s also better to check what’s in your fridge or food cupboard before ordering takeout or go to a restaurant. See if you can’t put an interesting meal together with the ingredients you already have and a recipe you found on the internet.

3. Getting into too much debt:

“People often get excited when they start earning money – but then some go overboard and start acquiring possession they often don’t need, without putting money into savings first,” Sibiya says.

If you suddenly have access to credit, the temptation to spend might be too great. But remember that debt is a big responsibility and you should never extend yourself too far, or you won’t be able to keep up. Your focus should be on saving and earning interest, rather than accumulating unnecessary debt. Don’t see effective saving, careful spending and paying back debt as soon as possible as things you can leave for later, Olivier says.

Buy cash as far as possible and don’t get trapped in easy credit, is Sasi’s advice. In fact, they caution, cut up your store cards. And speak to your credit providers as soon as you have a problem with making payments.

4. No emergency fund:

Sibiya says it’s crucial to protect yourself against shortages due to unexpected expenses. A medical emergency or a car breaking down can have a dire impact on your finances – especially if you haven’t made provision for emergencies. If you don’t have an emergency fund (you can open a money market account for this), you’ll likely have to take on additional debt or deplete your savings in the event of a setback.

5. Delaying retirement planning:

It’s important to start investing for “one day” while you’re young. Any delay can negatively impact your long-term prospects. You might think you have plenty of time but it’s best to start planning as soon as you start earning an income.

This way you benefit from compound interest and your savings has the best chance of countering the effects of inflation, Sibiya says.

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