12 Common Money Mistakes and How to Avoid Them - Part 2

Money Mistake #5

Don't just have savings, have some investments too.

Savings are good, but don't be like the unprofitable servant who just "saved" his money by burying it in the ground, look for good investments where your money will grow.

Savings are good for the "rainy day" and to help you get some bulk money to invest, but inflation and market forces can quickly eat it up.

Diversify your investment portfolio - i.e. don't put all your eggs in one basket. Have short and long-term investments and be patient. Some investments don't yield short term, be prepared to go the long hulk.

You may also want to hire or seek the advice of a professional investment banker to guide you and provide more information on where you can invest safely.

Money Mistake #6

Don't lend someone money you can't afford to lose.

Having this as a secret code will save you a lot of heartaches and help you maintain a good relationship with others.

If someone asks for a loan of say N100,000, or $20,000, extend the requested sum but don't expect to get it back.

If eventually, the fellow can repay, fine, and if not, you were not expecting the money back anyway, so all is well and good.

If you are unable to extend the requested amount at the time of the request, offer to give the person a fraction of the amount instead, say N20,000 or $5,000 and tell the person that it is a gift, and that you are not expecting any refund.

That way friendships are maintained, and there are no hard feelings.

If you lend someone money you will eventually require and the person is unable to repay, it can lead to desperation on your part, offence on the other person and a strained relationship between the two of you.

So, support those around you in the best way you can in a way that relationships are maintained and preserved.

Money Mistake #7

Don't guarantee a loan for someone if you don't have the capacity or willingness to pay should the person default.

This often happens when a colleague at work gets an office/ cooperative loan. The company may require that one or two other staff members guarantee the loan if the staff has not yet spent the minimum period in employment as their exit benefits won't be sufficient to cover the loan should the staff resign before paying back.

Staff resigns before the loan is fully repaid and the colleagues who guaranteed the loan have to pay it back. This is usually deducted at source by HR.

Now some people are honourable and will agree to pay back the loan after leaving the company - others are not.

And sometimes the staff who exited may simply be unable to pay due to unforeseen circumstances.

Either way, know who your friends are very well before you guarantee anyone and make sure the amount is something you can accommodate to pay should things go south.

I have seen both instances happen, one the staff left and blatantly refused to pay, putting his guarantor in trouble, and the other was honorable enough to continue the payments till the loan was fully settled.

Have you seen or experienced this?

What are your thoughts?

What additional advice would you have for others?

Money Mistake #8

Don't keep money that you don't intend to spend within your reach. The tendency is that you will spend it on what you don't really need.

What do I mean?

If you plan to spend only N1,000 or $50 today, don't go out with N3,000 or $150. The tendency is that if you have excess money on you, you will end up buying things that catch your eye that you don't really need, but just because you have the money on you, you end up buying them anyway.

The same thing applies to your ATM card. If you are not extremely disciplined, once you have the means to pay for something on you, you may find yourself buying unplanned things on impulse that you don't really need. So, avoid the temptation to spend by reducing the amount of cash you carry on you or leaving your ATM card at home.

So I hope you have gained a few tips on how to manage your funds better.

Missed Part 1 - You can read it here

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Written by Lady Shayo Imologome

Management Consultant, Strategy Thought Leader, Facilitator and Trainer

About me