Hello Money Savvy you,
Happy new year friends. I hope this year brings you prosperity and enlightenment. I hope you gain knowledge and a better understanding of your finances.
As I look back at 2021, I realise that I have made many financial mistakes. One of the biggest financial mistakes I ever made was in my 20's. I was bought property without fully understanding the costs and requirements of building in a residential estate. It seemed like a good idea at the time, but perhaps if I had done more research or had been educated on what I was getting myself into, I would have made a wiser decision.
Many of us make financial mistakes, not because we are reckless, but because we lack the know-how. Today, I’m sharing 5 money mistakes you should avoid in 2022 and every year thereafter.
Mistake 1 to avoid: Not checking the transactions in your bank account.
I know it can be boring to check your bank statement, especially if you are not a person who likes attention to detail. I have personally, on several occasions, had fraudulent transactions being deducted from my bank account. Even with debicheck, this can happen.
Solution: Set up automated transaction notification from R1.00. Use your bank app or contact your bank to set it up so that every time a transaction occurs on your account, an SMS notification is sent to your cell phone. Contact the bank to investigate any fraudulent activity on your account
Mistake 2 to avoid: Cashing out your retirement savings when changing jobs.
This is a common mistake and according to research, it is often times not a good idea as you are subject to a much higher tax rate than if you waited to withdraw it after retirement.
Solution: View your retirement savings as your future-self’s money, not your own. The majority of retirees struggle financially because they haven’t saved enough for their retirement. Retirement is a long period of time. At retirement, you could live for another 20 or more years; you don’t want to live this long in financial strife
Mistake 3 to avoid: Not having an emergency fund.
An emergency fund is an account that you can use in case of emergency, be it medical, financial or anything in between. This is money you set aside for a “rainy day”. 75 % of people are living paycheck to paycheck. They have no money set aside to cover unforeseen situations. You often see people tapping into their credit cards, go into advances or into cash overdrafts to try solve their problem. Some people go as far as getting a high-risk loan from a high-risk lender because they do not qualify with proper institutions
Solution: I highly recommend that you have 6 months of living expenses set aside. The truth is there are emergencies that you will not be prepared for, but you need to be prepared for the most common ones such as your car, cellphone, leaks in the house or an emergency trip to your parents. By setting aside a little amount every month, you are already ahead of the game. Remember, it is not a matter of "if" but a matter of "when".
Mistake 4 to avoid: Buying a new car
The most common mistake people do when buying a car is that they do not research enough. This results in them relying on the advice of salespeople (who usually take advantage of their customers). Without proper research or knowledge, you are bound to pay higher interest rates than you qualify for, longer loan-repayments and buying unnecessary extras to name a few.
Solution: The most important aspect of buying a car is doing proper research beforehand. This will prevent you from falling prey to salespeople who will advise you into buying a car that is not right for you. Doing your research also opens you up to a variety of options which helps you establish a deal best suited to your needs. If the dealer senses your business belongs to only him or her, you forfeit the advantage to negotiate. It is also important to line up your finances before shopping. If you settle for dealer financing without first checking with your own bank or other institutions, you run the risk of having to pay higher interest rates or being tied to a longer loan-repayment period.
Mistake 5 to avoid: Buying into get rich quick schemes
With the cost-of-living skyrocketing each and everyday, most people are struggling to adjust to make ends meet and unfortunately fall victim to get rich quick schemes. These schemes promise high pay-outs with minimal effort over a few days, weeks, or months.
Solution: Be wary of opportunities to get rich quick. If it sounds too good to be true, it probably is too good to be true. Like the saying goes, "good things take time" so do take your time and researching every financial investment you are considering. I would also advise that you seek informed advice from a Financial Advisor before buying financial products.
I have made some of these mistakes, hopefully most of you won't have to experience these. Which of these mistakes have you already made?
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