Life can become pretty expensive regardless of which stage of life you currently find yourself in. However, the good thing is that not all financial pains in life are obligatory. What this means is that there are ways around avoiding such pains.
When you successfully avoid many of the money traps that come your way, you find yourself with more cash that can be saved. Over a period of time, this grows to give you better control over your financial well being. Therefore, to make more informed decisions with your money, you need to avoid the following financial traps.
Gambling Addiction
It’s easy to become fascinated by the allure of winning money by staking on games like football, racing and other sports but this is a financial trap. Interestingly, betting has become quite fashionable but by continuously staking your money on games of chance, you risk getting yourself trapped in a hole of addiction that many never get out of.
By gambling, you are willing to risk something you truly value in the hope of getting something of even greater value. Gambling stimulates your brain’s reward system much like drugs or alcohol and could lead to an addiction.
According to the Tribune newspaper, there are now over 60 million players in Nigeria that engage in casino activities; with a large percentage of them being sports betting and online gambling sites.
Prioritising Wants Over Needs
Let’s break it down here – Needs are basically the things that you must have in order to live. Such things include food, clothes, a job and a roof over your head. On the contrary, wants are those things that you wish to have because you want to add a layer of comfort to your life.
In other words, needs are the necessities while wants are more inclined to your desire such as a bigger TV or a VR headset. When you prioritise your wants over your needs, you will end up living beyond your means and that in itself becomes a financial trap
Waiting For a Raise to Start Investing
Have you ever told yourself that you would start putting more money aside for investment once you begin earning more? You probably have and it’s okay but where there’s a problem is if you still believe in it.
First, let’s make it clear that there will never be a good time to start investing. We recommend investing just as much as your income allows and then slowly working your way up to a higher percentage of your earnings over a period of time.
When this is established, it will be easier to set more aside when the raise finally comes your way. Time remains one of the most important components of building wealth. Starting today gives you an opportunity to build more wealth with a lot less sacrifice required on your part.
Cheating Yourself Out of Life Insurance
No matter how long you live, one day you will pass away and with this comes the responsibility of financing the burial. Do not assume that this will be taken care of especially when you have a family of your own.
Life insurance ensures that the cost of the funeral will be covered at the barest minimum. Not having a life insurance policy could put a strain on your family financially if your time happens to come unexpectedly, which is why you should consider a life policy.
Borrowing Money Blindly
There’s a good way to borrow money and there’s a bad way to borrow money. One bad way to borrow money is by jumping at the first loan that comes your way. Before you take a loan, it’s important to weigh all your options by ascertaining things like the interest rate, repayment period, payment plan, terms and conditions and other details. For instance, would you settle for a personal loan with an interest rate of 15%-20% or would you go for an affordable option from Money in Minutes.
Let’s even say you are more interested in salary advance loans, would you rather take a loan with a 12% interest or an interest-free salary advance like WageX?
Not Having Plans For Your Money
Research has shown that a lot of individuals like you don’t have a budget. For instance, do you recall how much you spent last month? That would be a solid start because, without a good understanding of where your money is coming in from and where it’s going, you’re quite likely to either struggle financially or regret some of the decisions you are currently making.
If you’re not sure how best to approach this, why not try the 50-30-20 model. According to this model, your necessities take no more than 50% of your monthly income, discretionary spendings like subscriptions and dining out take no more than 30% while the final 20% goes into your savings.
Not Willing to Take Risks
The type of risk we mean here does not refer to quitting your job and diving into the life of an entrepreneur. Not everyone is wired that way and that’s perfectly fine. Rather, what we mean here is that you shouldn’t be afraid to try new things that will take you from where you are or where you truly want to be.
Feel free to learn a new skill, ask for a raise at work or even explore that new career path that has continuously piqued your interest.
Avoiding Little Luxuries That Become Everyday Necessities
There’s nothing wrong with buying suya or grills on your way home because it’s your money and you deserve to enjoy it. However, the moment you cultivate the habit of turning them into everyday essentials, it becomes a financial trap as you could end up spending thousands of naira on these little luxuries.
If you already do this, a great way to put a stop to it is to track how many times you indulge in it in a week or month. Once you notice an increase in frequency, you can cut it out for the next few weeks to avoid making it a habit. The same applies to those little things you have a habit of buying.
Not Making Financial Decisions With Your Partner
If you are married or in a serious relationship, then it is important to be on the same page with your significant other financially. For instance, we know that starting or keeping a family requires a high level of financial dedication. Working together makes it easier to hit your financial goals. Also, it saves you the stress of routinely reminding or convincing each other why you both need to work on a budget that is mutually agreed on.
A Desire to be Comfortable
There’s nothing wrong with living comfortably but this should not come at the expense of your financial well being. Would you rather carry a ₦2 million leather bag with ₦20,000 cash in it or would you rather carry a ₦20,000 leather bag with ₦2 million cash in it?
At the end of the day, the choices you make are up to you but you need to be wary of little expenses that seemingly make you comfortable. Remember, a small leak will sink a great ship.
Final Thoughts on Financial Traps You Must Avoid
It’s one thing knowing what these financial traps are and it’s an entirely different ball game avoiding them. Life in itself is full of distractions and this is why we advise that you have a weekly review of your budget to see where your money is going on a weekly and monthly basis. This way, you will be able to call yourself to order whenever you feel you are derailing from your financial plan and goals.
Are there any other financial traps you’d like to share with us? Reach out to us via our social media channels and let us know.