Monday, January 23, 2017

3 Money Mistakes That Lead Women Into Debt

Happy Monday, folks :)

I mentioned in the 2016 Recap and 2017 Action Items post that one of the books I read last year was "The Smart Money Woman" by Arese Ugwu. It was an entertaining and educational read. I picked several financial wisdom nuggets from that book and added to the ones I had already learned over the years. Today's post is close to my heart because I know many women struggle when it comes to good money management practices (I myself was awful at it for a good period of my life). I am not a financial management expert however, I want to share 3 money mistakes I've made in the past that you'd do best to avoid. 

I was quite terrible at this. I had no account of the money I spent -- how much, to what product or service, when, why, etc. I operated under a pseudo safety net, assuming that since I considered myself a "modest" spender then I was probably always fine and anything I spent money on was fine; which wasn't always the case. Many months, I ended up spending more than I expected I would, on many items that were unnecessary, and couldn't account for several of the expenses. An expense tracker is essential (you can do this the ol' school way by paper and pen or by using an excel spreadsheet or any mobile app that can support this). Once you start tracking your expenses, you will be able to properly assess how much money leaves your account daily, what specific itemsbills/luxuries/etc you spend it on, and most importantly what your major cost drivers are (the things you end up spending the most money). If you keep up with this practice, it will be easy for you to review this information at the end of each month, notice poor spending habits / unnecessary purchases, and commit to better money choices in future. 

Now this is funny. This is for us "high time chicas" that have falsely deluded ourselves into thinking that budgets are too boring and restrictive, and we can do "bad all by ourselves" without them -- oh no, senoritas. Budgets are an essential part of good financial management. It is necessary to setup a monthly budget that clearly outlines how much of your income goes to bills and basic amenities, how much goes to your savings account (in the event that an emergency - health or otherwise occurs - and you need immediate cash support), how much goes to your investment account (if you have one for stocks, property, or business investment ventures), and how much you can afford to set aside for "luxury" spending (dinners at fancy restaurants, Malaysian hair, etc). Budgets help you create structure and organization when it comes to your money -- helping you to prioritize "needs" first and then "wants" second. Everyone benefits from keeping budgets. Whether your monthly income is N40,000 or N40,000,000 -- you need a budget (moreso if you are one of those of the "upper echelon" whose earnings make it much more tempting to spend frivolously). 

I remember a time when I was broke. My monthly income barely covered my bills and I was penny-pinching for dear life. Beforehand, I had been a "stunter" -- frequenting restaurants on a daily basis, clubs every weekend (with their overpriced entrance fees and drinks -- $10 for a Long Island Iced Tea!!), splurging on weaves because you know I had to have my hair "laid", and buying items at random for the heck of it. Of course, I kept all of this up with my bandwagon of "merry go lucky" friends. However, things change when a bit of broke-ness sets in. You begin to realize that many of those "friends" are only willing to stick around when the drinks and dancing nights are plentiful. Many of those "friends" are not willing to provide anchor and support when you are drowning in financial debt -- they might even assist you in plunging further. Good news is, I accepted this lesson swiftly. When I noticed my pockets were becoming abysmal, I quickly changed my spending behavior. I cut down restaurant trips to once a week (if that), removed club outings completely (you'll be surprised how much money you save if you're not buying new outfits each week or paying entrance fees or buying drinks), and controlled my itch to buy unnecessary items because I wanted them. The great news is that during this period I was able to filter out the quality friends from the "merry go lucky gals" and still found ways to have fun and enjoy myself while being money-cautious (indoor dinner and movie nights with friends, free event outings around town, etc). If you're currently stuck in "stunter" mode and feel there's no hope out of it, please know that it is in your best interest (peace of mind, no debt) to free yourself of this form of bondage; and if you're worried about losing those "richer" friends, the question you should ask yourself is: are they really my "friends" if I feel the only way to keep them is to lead myself into debt?

There you have it folks. 

Any additional financial management tips you know that have worked wonders for you? 

I'd love to know...and then also implement. 

As for the length of this post -- KAI. I know I said more "short and concise" posting in 2017 but clearly it will be a little harder than I anticipated. 

Pray for me.

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  1. Good post! I would like to add writing down financial goals helps. Then it motivates me to know that I am controlling my spending because I am working towards something. SMART goals: Specific, Measurable, Action, Realistic, Time Constrained.
    Tracey L. Author
    Author of Oasis for My Soul: Poems and Inspirational Writings for Spiritual and Personal Growth

    1. Y-E-S to "writing" down SMART financial goals. There is something about writing a goal (financial or otherwise) down that increases the possibility of taking steps towards achieving it.

      I hope your week is going well Tracey :)

  2. I used to budget a whole lot, but i find out that a whole lot of non-budgeted expenditures come in and before month end i have to borrow. That's a bad money habit i have and this post has helped expose it.I have also been thinking of an emergency fund account. i really need to set that up asap. Thanks for this.

    1. You are welcome, Gabby :)

      Trust me, I am more than familiar with those "non-budgeted" costs that quietly creep in within the month. What I have learned is to force myself to classify them as either a "MUST" or "not a must"; if it is not a must, then I remind myself what my priority life goals are (my minimum financial requirement to achieve them, if so) -- that usually helps me to reduce my spending. As for the emergency fund account, set it up girl! You never know when you'll need it.

  3. On point as always! But to be frank, it really is hard to keep track of expenses on a daily basis. I remember the feeling of peace and control I experienced sometime ago when I (for a very brief period) scrupulously tracked all my expenses but of course the vicissitudes enveloped me and I had to fall back to some very bad habits.
    Nowadays, What I do when I get paid at the end of the month is to save a certain percentage (about 70%), spend 20% on my family and live on 10%. Of course, I do not track my 10% but I just try to avoid big expenses. Sometimes, I end up dipping into the 70% I had saved up, sometimes I don't.
    I find that my biggest weakness anyway is giving. I end up giving to friends or family that have emergency needs quite a lot of the time and that messes up my savings a lot. Dear Ada, care to explain how I can deal with close friends and family who come up with one request or the other that threaten to derail my carefully planned budget on a frequent basis?

    1. Hey Don! The daily expense tracking practice was hard for me in the beginning and took some time (a few weeks) to adjust to. For now, I'm doing well -- I have a trusted notepad I always carry with me in my handbag and when I reach into it throughout the day and see the notepad, it reminds me that I need to write in it for the day if I haven't already done so.

      I love how you've broken down your income into clearly outlined spending buckets (with percentages) -- 10% on personal living expenses? You're much better than me!

      Oh, I know when "giving" goes overboard -- don't have any great advice on this other than pray for the discernment to learn when or when not to give, and for the courage to say "no" :)

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