There are bad financial decisions that are common the world across and then there are those that are common to Zimbabweans. It’s hard to know if they are a result of economic circumstances, prevailing culture, lack of financial literacy or a combination of these or more factors. You may be familiar with some of these, perhaps you’ve seen a “friend” make these decisions or even closer to home. These decisions represent the beginning of personal financial trouble for people.
Not paying debts
This one is a major problem and I wish I had a statistic to show the gravity of this problem. However, I hope it suffices to say that it is quite a widespread practice. What’s the problem with not paying debts? Well besides getting your name blacklisted by anyone willing to take a chance on you it also shows your inability to commit to things. And sure today it’s a small debt, tomorrow it’s saving and investing for your future.
Waiting to get insured
The idea of insurance doesn’t particularly excite anyone nor should it. However, insurance remains one of the most important things in a personal finance plan. Who should be insured? Everyone. Who is in a position to be insured? Anyone with anything to lose. In this case, insurance includes medical aid, burial plans, business insurance and other more mainstream policies such as life assurance. The right time to get insured is now. Waiting until some magical event doesn’t end well for many.
Falling for scams
You don’t need me to tell you why falling for scams is a bad decision. It only ends in one thing and that is you and your money part. The difficulty is of course telling the difference between a scam and something real. The key is to see the essential character of scams, their substance rather than the form they come in. The scammers are smart and work full time at improving their scams and finding ways to convince you. Always remember not to jump into anything until you are sure.
Spending too much on certain things
It’s your money and of course, you are going to spend it on what you want to. When personal finance experts make recommendations on what percentage you should allocate to certain things it’s based on research and history. It looks at behaviour and worst-case scenarios. So you need to first understand why they recommend these percentages and secondly be honest with yourself on the things you are spending too much on.
Not saving
Saving is again a very important activity when it comes to managing personal finances. Saving refers to money that remains with you; the difference between your income and your expenditure. The idea is of course to keep this money through emergency funds, investment and other methods that keep the money with you. Not saving can best be described as personal finance suicide. Financial freedom starts when you start empowering yourself financially and that can only be done by giving yourself financial resources.
No emergency fund
I have trouble with a lot of people who come to me for help with sorting out their finances. The emergency isn’t an attractive idea to many. People don’t want to do it. It just doesn’t seem important. Everybody wants to go for the business idea or investment that is going to make them rich. However, emergency funds prepare you to be rich. If you do come across an emergency you will have to eat into your business or investment funds, not a good idea. You don’t have to establish an emergency fund straight away, taking a small percentage of your savings and directing it towards slowly building up an emergency fund will work.
Ignoring your budget
Setting a budget, regardless of how detailed it is, is one thing but following that budget is another thing altogether. Many people struggle with sticking to the budgets they make for themself. Then turn around and wonder why things aren’t working. A budget is a plan, not a fantasy idea of what you would do in a perfect world. You need a realistic budget that addresses your goals, your needs and if possible your wants too.
You probably don’t relate to any of these bad financial decisions but I’m sure your “friend” that you thought about earlier will. Be sure to understand each decision mentioned here so you can share it with your friend and help change their life.
