It’s easier to give advice than it is to admit mistakes. We see this with the older generation who constantly offer direction to young people, especially in regards to how they should lead their lives and how they should handle their money. However, this guidance is usually unbalanced as it is not relational. It is more of a telling off and scolding which makes them look like perfect people who never made any financial mistakes. There may not be a definite formula for success but people love a hero story and learn better from people’s mistakes, experiences and pitfalls.
This is the reason why more and more of these financial gurus should be telling us more about the mistakes they made and how we can avoid them as well. Some of the financial mistakes you make in your 20s could end up haunting you the rest of your life, as they can form a habit that will be hard to shake off.
I asked a few of my friends between the ages of 28 to 40 years about some of the money mistakes they made in their early 20s and here are a few gems that I picked up.
Not saving – Sophie, 28yrs
“I was a big spend thrift. I believed in buying good things to treat myself whenever I wanted. Not a bad thing when budgeted for, but I was going overboard. I would spend every single penny from my paycheck and not save. Looking back, most of those things were unnecessary and I could have channeled that cash to experiences and savings.”
Waiting too long to make investment decisions – Catherine, 40yrs.
“There was a great deal that came through when I was 25 years but I was indecisive and missed out on a good bargain on an investment. I had done my research, saw it was viable but was too hesitant because I procrastinate a lot and ended up missing the entry level deadline. Some financial decisions have to be decisive because some opportunities only come once. Be prepared with information and funds.”
Putting others before myself – Frank, 30yrs.
“As the first born, I was expected to help out with my other siblings once I started working and it really put a burden on me. I could not save. But that’s what I thought. Looking back, I could have saved as little as 10 per cent of my income first, then help out with the remaining budget so that when I lost my job, I would have an emergency fund to cushion me. ”
Ignorance and lack of financial knowledge – Mariam, 35yrs.
“For the longest time, I used to save money in my bank account not knowing that the interest being earned was meagre. If I had known about fixed deposit accounts in banks, money market funds or Saccos from earlier on, I would have earned better returns. I was letting my money lie idle for about 2 years before I learnt of other investment tools with greater returns. So read widely and talk to people. Missed out on the power of compounding interest that would have seen my money grow.”
Maxing out my ATM card during a night out – Danco, 32yrs.
“When I first started working, I would go with my ATM card to the club. Big mistake. Since I was not touching money physically, I was swiping all night long buying drinks for everyone and I ended up using up all my salary even before paying rent.”
Accumulating unnecessary debt – Mary, 30yrs.
“I was the type of girl who would walk into a boutique and want to buy everything but since I couldn’t afford it, I would take a lot of items on credit and at the end of the month, I wouldn’t have enough to live on after paying my debts and that would lead me to take soft loans. It was a cycle. I was borrowing from Peter to pay Paul.”
Giving in to peer pressure – Kamau, 38yrs.
“I bought a car on loan because all my friends were driving and I felt like the odd one out. I would advise young people not to be in a rush. It’s okay to walk or use public transport and now that we have Uber, its more affordable. Don’t be pressured into living a lifestyle you can’t sustain. The money I used to pay back the loan would have been used towards saving or putting into an investment.”
The lessons shared can help you adjust the way you’ve been handling money and how to plan your finances in general. I am sure that you can relate to a few of the mistakes shared and now have the knowledge to change the bad money habits you’ve had. Another useful piece of information I’d like to add is most of the people I talked to recommended the book, “The Richest Man in Babylon” to help you with practical financial planning and setting yourself up to becoming wealthy.
By Cynthia Kimola