10 Financial Mistakes to avoid in your youth
1. Peer pressure–
Most youth want to keep up with their peers without considering their current financial status. They want to fit in their social circles without 1st establishing how they gain their income and therefore leading them to make irrational financial decisions. Our Advise is keep away from the peer pressure and develop a savings culture by setting goals according to your income. This will be the only way to have a definite future.
2. Having no saving culture–
Saving is not dependent on the amount of money you are earning but mere discipline. Always set aside at least 10% of your earning towards saving and eventually investments. There are many avenues in Kenya that can help one to make saving. These include Sacco’s, Unit Trusts-money market fund, life policies and bank fixed account among others. Financial experts advise have your money work for you. How does this work? Keep your savings in an interest bearing and safe savings avenues and most recommendable in where you earn compounded interest like Money Market Funds. This will make your money continue to multiply and over time be able to pay you back. Stock market is another opportunity to invest your savings for long-term gain.
3. Withdrawing pension funds before attaining the retirement age–
More often than not, when most youth leave one employer to another or to business, they withdraw the 50% of the employer’s contribution and 50% of their own contribution that is allowable by the Retirement Benefit Act (RBA). When they withdraw this amount, the money is mostly used to upgrade their lifestyle or even venture into risky ventures without research hence depleting their funds. They forget the goal and purpose that had been set by the pension scheme hence this poses a great financial risk to such people during their retirement age as there is only little left to live on.
This has become a huge mess to the society! Gambling discourages hard work and lots of productive hours are being wasted among the youth in this vice as they wait for quick money which never comes. This has also led to high borrowing rate to fund the addiction and laziness among the youths. Remember even the bible says those who don’t work should not even eat and commands everyone to work and earn their own living. 2Thes 3:10-12
5. Mobile loans borrowing–
Due to the ease of accessibility of mobile money, our youth are borrowing in a huge way and spend the money on impulse purchases and some gambling. These mobile loans not only have very high interest but also eventually become an addiction and most users borrow one mobile loan to repay another. This is a deep hole that a big percentage of youth have sunk in and keep digging deeper. A debtor is always a slave to the lender and this makes them slaves to these mobile loan apps. One of the secrets of becoming financially free is repaying your debts. This calls for discipline and firm decisions.
6. High lifestyle–
Our youth want to start working today and drive the latest car and live in the best neighborhood tomorrow. Trust the process and be patient till you afford these luxuries. Do not over commit your finances to acquire depreciating assets like expensive cars when you do not really need them at the moment. Don’t rush to live in the posh neighborhood when you have no investments to fund the rent there. Don’t rush to take a mortgage and commit your 15 -20 years paying the debt yet you can save, invest and acquire the same property at a lesser cost. You can buy land and latter raise money to build within a period of 3-5 years and avoid a 20 year debt which has an equal or more interest on it.
7. Lack of financial literacy-
More and more time is being spent watching movies on Netflix or on social media platforms. Youths should invest at least 30 minutes daily in learning on financial literacy since this is not taught in school. Read a book or watch a clip on finances. There are threads on twitter that keep on teaching financial literacy. Follow these financial gurus on twitter. It’s said twitter is one of the social platforms you can learn a PHD in finances for free.
8. Lack of patience to grow a skill or a profession-
Most people and especially the youth do not have the patience to stick to one thing and make it work. Perfecting a skill or a profession is one of the keys to success. Consider a trader who only specializes on one item and all the customers recommend friends to him! that could be you. There is always someone doing better than you, so stick to what you are doing and make it work best. Knowing that you are best at a certain skill gives you confident to stand even before Kings knowing you can rarely be challenged. Consider an athlete like Kipchoge.
9. Marrying the wrong person–
There is no greater tragedy than marrying the wrong person. It will drain you emotionally, physically and also limit you financially. Take time to choose a spouse without being under pressure. Find a friend whom you genuinely relate. Seek to know the heart of the person than just the physical appearance.
10. Time wastage-
The greatest asset that a youth has is time. Use your time wisely to develop yourself. Learn a skill, read a book, go back to college- all these will reward you back financially and give you a better life. A number of youth waste a lot of time before deciding on their career paths. It’s important to discover yourself early and specialize on a career path. Don’t be a jack of all trade as this is time wasting.
This blog has been compiled by Steve and Rachael Muriithi. Visit www.earnestinsurance.co.ke to keep learning more.