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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Don't let Easter festivities throw you into a financial fix

Happy Easter! 

 Today evening marks the beginning of a long weekend and there are all sorts of enticing activities lined up to celebrate the Easter holiday. Celebration is good, but you need to be conscious such that you don’t spend all your money in one weekend, leaving you with no money to pay the living expenses that come after Easter and forcing you to take a loan thereafter to survive. Use this checklist to ensure that the four-day Easter weekend doesn’t get you into a financial fix:

 1. Make sure your pending essential April expenses are handled.
How much money do you have left to cater for your living expenses in the remaining 17 days of April and up until you get your next pay-check? Do a mini budget of the cash in hand versus the pending April expenses such as:

·         Food and groceries electricity tokens

·         water, gas/charcoal/kerosene/cooking fuel

·         mobile phone airtime

·         internet bundles

·         TV subscription

·         fare/fuel, car maintenance

·         Lunch at work

·         child expenses/daycare

·         laundry/cleaning lady

·         allowance to parents/siblings/relatives/friends

·         birthday/wedding/baby shower/bridal shower/occasion gifts

·         Donations to the needy

·         Church offering and donations

·         Toiletries/cosmetics

·         Haircare and beauty for you and the kids

·         Clothes/shoes/accessories

·         Doctor’s appointment/medical bill

·         Movies/events/fun activities/entertainment

·         Due debts

·         Standing orders

·         Chama contribution

2. Do you really have money to go on holiday?

 If after taking your pending April expenses versus the cash in hand you have a surplus, then you can decide to treat yourself and your family for the holiday within a budget that takes into account the amount of money you have to play with.

3. What's the plan?

Think about what you want to do this long weekend. Do you want to travel to the village? Do you want to take your family out for lunch and entertainment? Do you want to go on a getaway to Naivasha or Mombasa? Do you want to go for nyama choma, drinks and dancing with your friends? Do you want to host guests at your home? Decide what you want to do, then go to the next step.

4. Make an Easter budget that fits the cash you can spare for fun.

Make an Easter budget based on what you want to do, then check if the money available to spend on Easter is sufficient to cater for your costs for your selected activity. For example, if you want to go to the village, your Easter budget might include car fuel or fare to and fro, shopping for your parents, some money to spend with family and friends at the local village pub, some money to buy beer for the village idlers who think you are very rich, some money for emergencies, etc. If your plan is to go drinking and dancing from Thursday evening to Sunday evening, you’ll need to budget for fare/fuel/taxi, drinks for yourself and other people if you plan on throwing rounds or buying random drinks for men and women you find in the club, water, snacks, etc. Once you break down your costs and do a total ask yourself if you can really afford your chosen Easter activity. If for example your plan is to go to the village and you only have Sh5, 000 to spend on Easter (from step 1) and your Easter budget comes to Sh30, 000, you either have to cut down or cut out some expenses or decide to choose a different activity that costs Sh5, 000 at most, instead of Sh30, 000 you really don't have.

5. Don't get it twisted!

Do not use money meant for essential bills to celebrate Easter. If there is no Easter money, then there is no Easter money. You will not die for not having money to splurge on Easter.

6. Keep yourself and your spending in check.

Write down every expense that you plan to incur this long weekend and allocate an amount of money next to each expense. Carry the list with you and use it to monitor your spending to ensure that you don't go over budget. Review that list every morning and in the evening to track your spending. Before you head out, have a clear itinerary of what you will do and how much it will cost and ensure that you carry money just for that. If you happen to go over budget, you will have to strike out some things to accommodate the ones that are more important. If you've set Sh20, 000 for Easter weekend expenses, do not go over that. Do not give yourself a blank cheque to spend money without restraint. You do not want to look back on Tuesday morning with regret over your poor spending choices for a momentary holiday.

7. Keep costs manageable if you are hosting guests at home.

 If you are hosting guests to a party at your house, do a hosting budget based on how much you can afford to spend on the holiday. You can also have a potluck, where instead of shouldering the entire hosting financial burden by yourself, you can ask the guests to come with a meal and drinks then form a buffet of all the meals and drinks the guests carry with them.

8. Do you need new stuff for Easter?

 If you are going on a getaway this long weekend avoid the temptation to buy new things just for the holiday. Do you really need a new swimming costume for this Easter weekend when you already have one in your wardrobe? Before you buy something new specifically for Easter, ask yourself, do I need it or am I just buying it for a four-day affair? Will I ever use it again? Can I even afford it right now?

9. Lead yourself not into temptation.

When you set aside money for the remaining 17 days of April e.g. fare money, food money, etc, put it in a different account and don't carry your ATM card as you head out to celebrate Easter to avoid the temptation to withdraw it and use it on long weekend expenses. You can carry some money for emergencies, but remember that it should only be used for emergencies, which are unexpected situations which must be dealt with immediately because they cannot be ignored. For my emergencies, I usually have a debit card with money in it. The card is not linked to a bank account. Think Nakumatt Global or Nation Hela. The good thing about this card is that you can transfer the money from the card to Mpesa if you need it for an emergency. The card is strictly labeled emergencies only (my label) so if I ever take it out, I ask myself, is what I am about to pay for with this card an emergency? If the answer is no, I put the card away. You can even give it to your sober and firm relative to keep for you with strict instructions that it can only be released to take care of emergencies.

10. You can have fun on a budget.

Remember to be conscious of your choices and your spending. Stick to your long weekend budget. You don’t need to take a loan to celebrate Easter and you don’t need loads of money to have fun. You can go to the market, make yourself or family a special meal, and then watch a feel-good movie together or take a photo at a studio or go to the local park and run and play around. 

Happy Easter!


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