Personal financial management is all about making the best sense with the money you have available. There is a bit of a movement that has formed against the seemingly unattractive parts of it like saving money and defending your finances but they are a big part of this. There are ways you could be using money daily but you just don’t realise it and this affects your finances both in the short and long term. Today we’ll identify these things and give you tips on how to guard against them happening.

Unused items

Most if not all of us are guilty of this on some level. Perhaps you paying for a subscription service that you never really use. Video streaming service perhaps? Or something more down to earth like a gym membership perhaps? Perhaps it’s not a subscription service but rather something that you hold on to that no longer serves you. Whichever you look at it you could be losing directly through continuing to pay for the service or indirectly through the opportunity cost foregone by not selling that thing and directing the funds towards something means you’ve been intending to do.

Not investing

This one isn’t as direct as those who invest think it is. The point of investing is to grow your money. If you consider what Zimbabweans have been through concerning inflation and loss of monetary value the rewards of investing should be plain for everyone to see. However, investing is complicated and that is when you are investing in legitimate channels. The complication added by investment scams makes things worse.  The first key is to find the right investment for you, it must match your desires in terms of entry and exit while being congruent with your goals for the money.

Ignoring opportunity cost

The opportunity cost of any decision you make is what you forgo by making that decision. In simpler terms, the opportunity cost of any financial decision is what else you could do with the money that you commit to that decision. The money you spend on that gym subscription you don’t use could instead be invested into something like Unit trusts.  Understanding the importance of opportunity cost and learning to identify it is important in personal finance. Not calculating opportunity costs will cost your finances a lot.

Not negotiating

Learning to negotiate things in life can do your finances a world of good. Not negotiating may cost you a lot in life. There’s a line, a very thick one between haggling and negotiating. The haggler will attempt to get a lower price for any and everything even when it doesn’t make sense to do so. The negotiator is a carefully planned researcher who knows what else is available, what makes good value and what is not possible. You would rather be the latter. Also negotiating is about getting the best deal, not necessarily the cheapest.

Choosing poor payment methods

Nothing demonstrates this point as well as the deep dark world of hire purchase agreements. Depending on how long the agreement goes for you could easily pay two to three times the amount that you would buy the item outright. Hire purchase isn’t always a bad idea but if the item in question isn’t making you enough money to cover the premium then it is a bad idea. Let’s face it, it’s very difficult for a sofa to make you that much money if any. To illustrate I have included a real-life example of an item I recently saw for sale. The other vendor price shows the cash price of the same item for another vendor.

Another vendor599915999N/A
Cash price79991799933%
3 months33153994566%
6 months176561059077%
12 months914121096883%
16 months706706161129688%

Undervaluing yourself

This one especially applies to business owners and creatives. That said you can find this issue in those who are full employees. When agree to work or do work for less than you know you are supposed to you are losing money at the moment. Understandably, there are situations where it is necessary to do so, sometimes it’s the best thing to do. However, it is not a good idea to do this forever and at some point, it is best to seek something that pays you what you’re worth.

Address these matters to prevent yourself from losing money daIly. Some of them may be small but in the long run, the effects of them become very deep and could be the difference between a comfortable life or continuing the life of struggle.