Don’t make the same mistakes: Create a money savings plan that works
If you had the chance to make a better financial decision than one you’ve made in the past, what would you do differently? Maybe you wish you had started saving earlier in your working career, or you regret having taken a loan for something you didn’t really need — this is likely to be a situation you wish you never landed yourself in, right?
The good news is, you can use that experience as an opportunity to learn. Our experiences can teach us vital lessons that help us to recognise future pitfalls – our relationship with money — and help us to avoid making the same financial mistakes again.
In this blog, we take you through a few of the most common money mistakes people make. We share tips on how you can avoid them and create a working money savings plan for your future.
Financial pitfalls to avoid
- Not investing in financial literacy
We make financial decisions every day. Whether you’re buying bread, milk, electricity, or paying rent, there’s so much you have to consider when making those decisions. It's therefore essential that we educate ourselves about sensible financial practices. This is called financial literacy — the knowledge required to be able to make sound and responsible financial decisions. It focuses on the ability to manage personal finance matters in a financially competent way. If you’re looking for the best savings investment vehicles, you’ll need to learn all you can about interest rates to make accurate savings account comparisons.
- Living above your means
Getting your very first ‘grown-up’ salary and finally moving out on your own can be an exciting period of your life. It means you can finally do the things you couldn’t do when you didn’t earn a salary or still lived at home with your family. So it’s easy to want to spoil yourself, to want to use your hard-earned money to buy that bag, those shoes or even go on that holiday you’ve always dreamed of. This makes it easy to put off saving while you enjoy ‘living your best life’. However, this opens the door for tons of money mistakes, like buying a car you can’t really afford or getting credit for things you could have saved for instead.
- Not having an emergency fund
Wouldn’t it feel great to have some money to fall back on when you get thrown into a financial emergency? Having a money savings plan will give you peace of mind when faced with a major life crisis. That ‘savings plan’ is an emergency fund. Building an emergency fund is a very important step towards your financial wellness.
- Getting into unnecessary debt
Those store cards, credit cards, and car loans can be very enticing, tempting you with discounts and low interest rates. However, once things start to add up and those introductory rates disappear, your debt can become a nightmare.
How to avoid financial mistakes
- Know your money personality — your response to money is dictated by your personality. Understanding your money personality is a great first step to shaping your financial decision making and being aware of the pitfalls you need to avoid when it comes to spending, saving and investing.
- Create a budget — budgeting is the best way to gain control of your finances and make sure your money is working hard for you. If you’re struggling with this, here are some simple tips to get you started and to help you find easy ways to save money each month.
- Pay yourself first — the earlier you start saving, the more money you’ll have — thanks to Compound Interest. If you invest your savings in a smart investment product, such as African Bank’s Fixed Deposit account, you will start to earn interest. If you continue to save that interest, you begin to earn interest on the interest. Your money works for you.
Money mistakes are common, we've all made them. Don’t let your past money mistakes prevent you from making fresh progress with your finances. You can start over. The best time is now and the best place is where you are.