Money mistakes beginners make in business and in life

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By Steve Umeme

Financial discipline is fundamental for any individual and business, yet it can be as challenging as it is rewarding. Read these money mistakes that rookies make that we should all avoid.

#Money Mistake 1:
Never borrow money that accrues interest to start a business (except if you are paying for it through your salary); only borrow to grow your business. This is because business takes a long time to gain ground and begin making profit, yet most loans repayments have to be made within a month of taking the loan or even earlier. Therefore, never borrow money to start a business expecting that the business will generate income to pay back the borrowed money plus the interest.

#Money Mistake 2:
Never spend money you haven't received. Don't even promise someone money based on a promise you have from someone else. If someone tells you: "Ezra, come to my office tomorrow at 9am and pick Sh30K"don't go out to buy items on credit based on this promise, with the hope that you will pay off your creditor when the promised money comes; it may not come as promised and this will leave you in problems with your creditors.

#Money Mistakes 3:
If you want to save, whenever you receive money, don’t start spending hoping that you’ll save what remains. Normally what remains is zero because as long as money to spend is available, the numerous things you can spend it on are also available. And things to spend on even incite their 'relatives' so that you spend even more than you had planned. When money to spend is not available, we naturally find a way of doing without it. That's why I've learnt to save with an INVESTMENT CLUB. Once I send money there I assume I no longer have it. Before you spend any money, put your savings aside then spend what is left after saving.

#Money Mistake 4:
When you get an opportunity to meet a very wealthy person, never ask for money. Ask for ideas on how to make money. They may even choose to give you money on their own after seeing that your ideas are great, but let getting money from them never be your objective.

#Money Mistake 5:
Keeping your seed instead of planting it. Many people stop at saving. It's very, very difficult to save and have all you need to maintain your lifestyle especially after retirement. When you save, your savings are seed; plant it. When you just keep the seed (saving money) some seeds begin to die (eaten by inflation and the like). That's why I recommend that you read about the different types of investment vehicles you can use to grow your savings. I am not necessarily talking about putting the money in a business, because you can easily lose money in  business. I am talking about putting it in an investment.

#Money Mistake 6:
Never lend someone money you are not willing to lose. By the time you lend someone money, be contented in your heart that should the person fail to pay, you will not die. You should not even lose that person's friendship if they fail to repay the money you lent them. If you feel the person might fail to pay you and this will not affect your relationship with them, then lend them money. If their failure to pay would make you hate this person’s entire clan, please advise the person to go to the bank.

#Money Mistake 7:
Never append your signature to guarantee someone on a financial matter if you are not willing or able to pay the money on their behalf. Do I have to explain that one? No, it's self-explanatory.

#Money Mistake 8:
Avoid keeping money you don't intend to use in the short-term within easy reach. For instance, don’t walk with Sh100K in your pocket when all you plan to do in a day costs Sh20K. Like I mentioned in Money Mistake 3, there are always expenses available to gobble any money that is within reach, so if you don't want to lose it, put it away in a safe place.

#Money Mistake 9:
Avoid keeping money in inappropriate places e.g. in socks, under the pillow, in a pit, in the sitting room, in the bra, in a travel bag that you will place somewhere in a bus ... impulse buying is a devil that will keep you busy!

#Money Mistake 10:
Spending money on an item that you can do without (at least for the time being). These days when I pick money from my pocket or wallet, before paying for something I ask myself: What would happen if I didn’t buy this? If I find I can live with the consequences of not having that thing, I smile and walk away.

#Money Mistake 11:
Paying an amount for something that's not the minimum you can get that same value for. In other words, if you are along Tom Mboya Street and you pay Sh5K for a shoe that you can get at Sh3K at Muthurwa, that's a money mistake except for those who have achieved financial freedom.

#Money Mistake 12:
Wanting to be the savior of the world by helping everyone in financial need. My sister, my brother,  you are not Jesus. If you find it so hard to say no to a financial demand, you may think you are practising generosity when in actual sense you are committing (financial) suicide. We are not learning to be miserable here; we are learning to live within the boundaries of reality.

#Money Mistake 13:
Consistently spending all you earn or more than you earn. It's like having a drum where you have an inlet that's smaller than the outlet. It will never get full. And should the inlet ever reduce significantly the drum will run dry. If you do it the other way round and the inlet is bigger, it will get full and even overflow. Hence, we have to always ensure we are widening the inlet while narrowing the outlet – all the time. Your side hustle comes in handy!

#Money Mistake 14:
Thinking about short-term only and forgetting about long-term or thinking about the long-term and forgetting about the short-term. For instance, Lydia was told that there's money in land. She saved money over a long period of time and bought 30 acres of land. Now she has the land but she is always broke. She is always complaining. She's disgruntled and she doesn't seem to see herself earning from the land in the near future. Now, let's ask ourselves: Having 30 acres of land and no money to feed your family or take a child to hospital, is that wealth or poverty? I think Lydia only looked at long-term needs and forgot that she has short-term needs that require money. What of those who find they are one paycheck away from salary? Are they thinking about the long-term needs?

Let’s take stock of our finances. How many mistakes are you guilty of? Do you now feel better-equipped to do better with these tips? Good luck, savers! Share this knowledge with your friends because it will not benefit you if you are selfish with it.

Steve Umeme, BBA, CPAK, CFIP, is a seasoned auditor, risk analyst and personal finance coach. He blogs at http://steveumeme.blogspot.co.ke/

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Mother’s Day: Ten gentle reminders for financially-savvy mums

Motherhood brings with it many changes in body, mind and the way we make decisions, including financial choices. For new mothers especially, it is easy to get lost in the idea of motherhood and to miss out on some financial choices that need to be made differently when children get into the picture.

Here are some ten tips to get your mummy financial chips in place:

1.   Be deliberate about your finances. When the children come, they come with additional expenses, which if not budgeted for, can leave one feeling like there is never enough money. Mums seem to have a superpower of making the most out of limited money, but that can only hapen if you know your priorities and plan to ensure that your income covers the most important things. This will mean budgeting, keeping an eye on your expenses, saving, investing and using money-saving tips such as buying groceries in bulk at a wholesale shop instead of a supermarket.
2.    Plan ahead; have financial goals – short-term, medium term and long-term. Once the children come, they will need to be included in your budgets and financial plans. When your child is still an infant, start planning for their kindergarten costs and all their educational needs from primary school to college, gradually. If you start saving for these major and inevitable financial goals early, you will find it easier to foot the bills once they come up, so don’t leave them until the last minute.
3. Don’t forget yourself. Many mums find themselves putting everyone else first at their own expense. You are also a valuable human who deserves your own attention, so take care of yourself. Don’t let go of your own personal financial goals. Remember to invest in yourself, in your career, in your dreams. Don’t walk around in tatters having forgotten to replace your worn-out wardrobe and don’t forget to give yourself a treat every so often for the great job you are doing taking care of your children and family.
4. Don’t try to buy your children’s love. Help your children create memories – sometimes this involves spending money, for instance taking them on vacation, but sometimes the most memorable moments have nothing to do with expensive toys, lunches or trips to amusement parks. Playing and running around with them, reading them a book or doodling with them might be the best thing you can do for them, that money can’t buy. Let your children know that money and things, though they may make some things in life easier, are not a prerequisite for happiness.
5. Make sure you have health insurance for yourself and the kids. At the very least get your family on NHIF which now covers both in- and out-patient care. Medical bills can drain your finances, making it difficult to save and achieve other important financial goals.
6. Build an emergency fund with three to six months’ worth of living expenses saved up to cover you in case of an emergency that threatens to wipe out your resources.
7. You might want to get life insurance which would help cater for your dependents’ needs if you died or got disabled before they are old enough to take care of themselves. Or at least have a contingency plan in the event that you were no longer able or available to take care of your children.
8.  Plan for retirement. Your children are not a guaranteed retirement plan, so don’t act as if they are. Have your own plan for financial survival once you get too old to actively earn a living; you need to be able to survive in the event that your children and everyone else abandons you. If your children choose to support you financially during your twilight years, it will be a bonus.
9. Remember you are not the Red Cross. Other people may have plans for your money, but put your needs and those of your family first. Don’t become the sacrificial lamb who takes on financial burdens of people who refuse to become financially responsible. Do not sacrifice your family at the altar of misplaced generosity.
10.  It’s good to have a husband or sponsor who caters to all your financial whims and then some, but learn and know how to take care of your financial wellbeing, with or without a husband. Life, or rather death happens; divorce too, so you need to know how to live well by yourself, whether it happens or not.

Happy Mother's Day!

This post is brought to you by #SaveWithMshwari for the #52WeekChallenge

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