Road to financial hell is paved with little bad decisions

 It takes discipline to develop healthy financial habits, but some missteps can lead you to ruin.

1.     Saving without investing: Money sitting in the bank doesn’t do you any good. Let it work for you. Think of every shilling as a foot soldier and put it to work so that it can earn you more foot soldiers. For a financially secure future, your savings have to grow. Therefore, make proper investments

2.     Taking loans without evaluating repayment capacity. Many working class Kenyans confess to taking loans before they’ve cleared existing ones. This is a very bad financial move. You have to be cautious when taking any loan. Just like you should save before you spend, you should also not owe more that you can pay.  In addition, get rid of loans that come with high interest rates.

3.     Solely relying on corporate health insurance: Most salaried professionals don’t see the need to purchase individual policies if their employers provide them with one that works. We forget that this is gone once you leave the job. And, even though it might be working, to save premium costs, your employer might trim the coverage. Have an individual health policy that, regardless of your job status, will stay with you.

 4.     Delaying to invest: Do not wait until you have ‘accumulated’ enough savings to start an investment. An investment of a small amount, thanks to the power of compounding, can lead to a huge payout for you in the future.

5.     Putting off retirement planning. This should be top of mind, alongside investing. Don’t delay retirement planning because you think it is only for those who are 40 and above. If you want a nice nest egg by the time you retire, start early. The power of compounding also works in retirement planning. When you start early, you will accumulate more money than that person who delays their investment.

6.     Borrowing from your retirement fund. There are occasions, such as your daughter’s wedding, that’ll come along and might tempt you to dip into your retirement fund. Don’t. The tax is exorbitant and this might threaten your financial security down the road.

7.     Ignoring inflation. Plan your investment portfolio in a way that it will generate enough returns which will beat the inflation impact.

8.     Spend first, save later. This is a common mistake that will ensure that you don’t reach financial independence.  Most of us tend to save money after we have taken care of our expenses. And we also live above our means. To avoid this, first identify the amount that you want to save each month. After that, create a budget with the money that’s left.

9.     Following herd mentality blindly: Sound financial advice is not a ‘one size fits all’ kind of situation. Therefore, advice that will work for you in your 20s won’t bear the same fruits in your 60s. Married couples also have different risks than singles. Do not follow generic advice blindly. Assess your current situation and make a financial plan that meets your life goals.

10.     Not reviewing financial investment periodically. By reviewing your portfolio periodically, you will be able to make fast decisions that will secure your investments from fluctuating markets. Your investment portfolio should be in sync with the current circumstances.

11.   Raiding your emergency fund. Identify your true emergencies and let this money be just for that. Let it not end up as your home improvement or vacation fund. Not even when you unexpectedly lose your job (you should have savings for this), because you’ll regret tapping into these funds.

12.  Buying a timeshare: If you don’t understand the financial obligation – annual maintenance fees and a significant deposit – don’t buy in. Timeshares will promise out-of-this-world vacations but as it stands, the real estate market is now flooded with consumers trying to unload theirs.