1) Failure to separate personal money from business money
2) Failure to set and live on a personal and business budget.
Not many people create realistic budgets around their income and needs. If you want to maintain a balanced and healthy financial life, you must learn to practice budgeting and living within your budget. Although budgeting can be complicated and time consuming exercise if we want to live in harmony and peace you must learn to patiently plan for your personal and business finances
Personal Finance Tip
Start by tracking your everyday expenses, to the last dime, based on your historical spending pattern of previous months differentiate your critical immediate daily needs, from your monthly needs from your wants.
Colour code these three in Red, Yellow and Black respectively. Then to budget for subsequent months eliminate the black wants expenses and Set the limits of what you can spend, and write a list of what you really need to spend on month in month out. This is a very simple practice that can save your life and stop you from buying unnecessary things especially when you go out to do your shopping and groceries make sure you go with a list, your budget and limit yourself and don’t over spend.
3) Making the mistake of not putting in place an emergency fund.
An emergency fund is the money that will help you live your life without lack in times of difficulty if for example you’re not earning a salary because your business is going through a dark patch of not income. Having an emergency fund is one of the most important financial habits especially because anything can happen at anytime. So the wise thing to do is to put a plan in place for emergencies. You can start with the money you have shaved off from your budgeting exercise when you cut off unnecessary spending on your wants i.e. the black column of your budget. Then you can gradually build upon this but consistency is key to developing this habit. Protect yourself and your business from pain set up an emergency fund now.
4) Spending beyond your means.
Ensure that you live on less than you earn. Generally in life you have to learn to abase and abound – You have to cut your coat according to your specs, needs, cloth or size not according to someone else’s specs, expectations, cloth and size. Now this is particularly a very bad habit for black people because we are always trying to keep up with the Joneses. We don’t live our own lives, walk our own path and run our own race. We try to live the life that we see other people living failing to recognize that we are all different and going to different destinations. Same happens for businesses, we must face our own lane.
It’s okay to own a comfortable home or to have a small nice office (not necessarily a big 10 Bedroom mansion) but a place you worked very hard for and bought in the same up market neighborhood. It’s okay to have a good functional personal or official car (not an expensive SUV). It’s okay not to wear designer clothes but dress very well and choose classy timeless clothes rather than always following fashion trends.
Must you get the latest gadgets, electronic devices or smart mobile phones when the ones you bought just last year or the year before are still functional and still delivering for you. You must begin to draw the line between what you ‘want’ and what you actually ‘need’. Don’t develop the habit of spending more than what you make. Also refrain from buying on credit or on loan for personal stuff. Don’t fund your excessive lifestyle on credit this does not make sense. Develop self-control, financial discipline. Be prudent.
5) Standing as Surety or Guarantor to a debtor.
Don’t guarantee someone else’s loan. This is a big mistake that many people make especially for their friends and family. They soon realize that the banks come for them as soon at that friend or family member defaults. Don’t take on the responsibility for someone else’s financial habits and don’t guarantee someone else’s lifestyle. I personally believe that what you can’t afford you don’t need. Hence let everyone live within his or her means. Don’t guarantee anything that can instantly put you in debt, what if the principal debtor defaults? It is almost impossible to know that the debtor will pay down on their obligation so don’t do it. Even though at the time of collection they have the best of intentions or they are good people, anything can happen to change the dynamics tomorrow. Don’t be a people pleaser to your own peril
6) Perpetually Paying bills or salaries late.
Pay all your bills and salaries on time. Paying bills or salaries late can become a bad habit that will invariably affect other people, because they also have bills to pay but they’re waiting for you to pay them so that they can in turn pay their creditors.
Also if you had a loan or credit card ensure that you pay down on principal and interest at the agreed and appointed time as this will lead to you paying a penalty fee, i.e. A late payment fee. If it’s something that happens once in a while and it’s outside your control it’s ok but if it’s a routine then it is a bad financial habit. Set reminders so that you know when your payments are due or consider setting automatic, direct deductions or scheduled payments from your account for very important long-term bills.
7) Don’t put all your investments in one basket
Diversify your income and investment portfolio:
•Don’t put all your investments in stocks- invest long term in this instrument
•Don’t do only real estate – you may need quick cash for a business opportunity.
•Don’t do only bonds – This requires locking down funds for a fixed tenure and you can’t break them.
If you have other passions, interests and hobbies that can make money from and that do not distract you, invest some loose money there. But don’t starve your primary business of funds because of a hobby. Try to generate income from sources other than just your salary. Ensure that our business in the areas of your interest, passion, hobbies, gifts and talents. Take your business seriously and run it professionally. Employ the right people to manage your business.
8) Not having proper up to date insurance on possessions, health and Life.
Always insure your possessions, health and life for their current value. Always update the value of your possessions such as your car, house, watches etc. and insure them for their replacement (not purchased value) because the whole essence of doing insurance is to be able to replace what you’ve lost on the date you need to replace it with the money the insurance company gives you after their financial adjustment exercise. Especially in this season when the exchange rate of the dollar to the Naira has tripled in the last one year so what you bought for $50,000 a year ago at an exchange rate of 160 Naira to 1 dollar will only give your 1/3rd of the value today at an exchange rate of 450 Naira to 1 dollar. Hence you won’t be able to replace the same possession even if the insurance company’s pays you. So each year use the current replacement value of your possession to insure it. Protect yourself from any unforeseen circumstance fire, theft, accident etc. You never know what might happen in the future. Insure everything you have, from your life, to your health, to your home, to your office, to your cars, to your watches. Insure for accidents, incidents, fire, loss, theft etc.
Don’t skip on your insurance premiums when they are due; For health insurance make sure the coverage that you’re getting is adequate enough even when you face dire situations – such as chronic illnesses or death. Get premium umbrella policies for yourself, business and your family. Also do your due diligence on the various top insurance companies and their history and products and try to use a single insurer so that your cover is total and discounted – Use the same insurer if possible for your life, health, home, car etc. and negotiate for a huge deal or discount.
9) Not investing in your future today or setting up a retirement fund.
Invest in your future and pay towards your retirement today. There’s coming a day when you won’t be able to work anymore. When your strength and sight will wane and you will have to depend and live on your investments. It is what you wisely and consistently invest today and yields interest that will take care of you tomorrow. What you haven’t put away today will not be there for you tomorrow. Delayed gratification in measure is therefore a virtue in this regard.
Ensure that you make good investments such that the interest or returns from the investment will be adequate to take care of you and your family in your retirement years. Don’t depend on the principal that you put aside but on the yield i.e. the interest from the principal investments. This is so that the principal can continue to yield more interest to take care of you. Don’t kill the goose that lays golden eggs, so that you can have all the golden eggs at once – Once the goose is dead there are no more golden eggs.
Only foolish people assume that they will need less money in their retirement. Only irresponsible, lazy and wicked parents look forward to living off their children in their retirement. A critical aspect of planning towards your retirement years is to invest daily in your health and wellbeing because if you’re hit by a disease in old age it can wipe off all your investments in no time. So health in retirement is wealth. Develop a Healthy Spirit, Soul (Mind) and body by eating and drinking right, thinking right, feeling right, speaking right, hanging with the right people and living right. Make sure you’re very active in mind and body even until old age doesn’t mentally or psychologically shut down because you will immediately begin to physically die. Read; work out keep on keeping on, even if not at the same intensity as when you were younger. Get regular medical check-ups, in your older years and that’s where having a premium health insurance cover is key. Without a good, diversified and safe investment or retirement fund, it’s hard for you to secure and guarantee your financial future. Afterall what exactly are you doing business for now? If you haven’t yet, start a long-term retirement deposit account or an investment portfolio today. The earlier you start the more sufficient funds you will have access to in the future. You can ONLY reap what you sow.
10) Procrastinating and waiting for the perfect opportunity or time to invest or save.
Start saving and investing today. There will never be the perfect time to save or invest. There is never enough money – So if you don’t develop the attitude and habit with the little you have today you will never do it with the plenty you get tomorrow. Many people are cheated from doing the right thing because of procrastination, wrong advice or fear. When you get any inflow or business windfall first pay yourself a percentage that goes into securing your financial future. There is no amount of money too small or too big to put away but the key is consistency.
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