The 7 Biggest Money Mistakes Africans make
The idea of finance is not taught in schools, which makes the source of the money mistakes Africans make apparent. These mistakes, when repeated, not only ruin our finances but could alter the lives of those around us.
We all need to collectively encourage participation rather than let the discouragement of financial education continue. While polls reveal that Africa has the highest proportion of adults starting or running businesses, progress is delayed. And it will continue until the top money mistakes we make have been solved.
The faster these money mistakes are accepted, the quicker it would be to avoid ruining our finances.
What are money mistakes?
Money mistakes are decisions we make that negatively impact our financial wellbeing. A money mistake can occur for several reasons that could be societal, cultural, and personal.
Oftentimes, while you think an action to be a money mistake, it may not be, and this does not mean that everything done wrong with money is a money mistake.
Even when it comes to your finances, there's nothing wrong with making mistakes. It becomes an issue, though, if you keep making the same mistakes repeatedly. Avoiding hassles and putting yourself in an excellent financial position may be as simple as learning from these frequent money blunders.
7 money mistakes Africans make that ruin our finances
These are some of the most common money mistakes Africans often make, whether in their businesses or personal finances.
Acquiring bad debt
One of the fastest ways to ruin your finances is to be in debt, and while this may be known to many Africans, they still acquire bad debt and find themselves on the brink of financial collapse.
The difference between good debt and bad debt is that while good debt helps you acquire assets that yield profits enough to pay back with interest, bad debt leaves you in a self-dug hole. This is the case because not only are you borrowing from your future selves, the money borrowed cannot pay the capital, much less the interest accrued.
The resultant effect of acquiring bad debt is that it usually ends up in a loop of financial troubles. The trouble begins with taking a loan from the bank or borrowing money from friends, family, or a loan shark and taking another one after paying back the first one collected.
To break out of this loop, things can be done differently. This could mean reducing how much you spend, increasing how much you earn, moving out of your quite expensive neighborhood, or perhaps deciding not to buy that new gadget.
Feeling too far behind to start saving
Saving is a habit that can be difficult to acquire when you have not done it before or after stopping it for some time. Since saving can sometimes save you embarrassing moments, it is essential to cultivate it.
Many have not started saving because they feel left behind, and this feeling of being late to the party prevents them from enjoying what's left of the saving party. It is never too late to start saving, no matter your income or how old you are.
Research by Demirgüç-Kunt and Klapper, 2016 on financial inclusion in Africa and the saving pattern of Africans is evidence that we need to get better at saving. The research reveals that only 4% of North Africans saved money while 18% of West Africans did.
Rather than asking yourself the "why should I start saving now after losing many years?" question, how about asking the "what do I stand to lose if I start saving now?" question. Binance Savings allows crypto holders to save and earn at the same time.
Relying on a single source of income
As Africans, we must have heard or experienced losing a source of income and getting REKT almost instantly. The benefit of hearing stories like this is that we understand how dangerous it is to rely on a single source of income.
The African Development Bank (Afdb) claims through its findings that "around a third of African countries, with a population of around 200 million people, are categorized as fragile. And they are home to an increasing number of Africa's poor, who are vulnerable to instability with possible spillover effects beyond their borders.
In this day and time, the best way to protect oneself from financial ruin is to have multiple income streams. Any less would be a call to be infringed by the financial ruin you're avoiding.
Another very crowded highway to financial ruin for many Africans is the urge to upgrade our lifestyles the moment we earn any more than we used to.
Yes. Lifestyle creep is a thing.
This is as problematic as it is dangerous to our finances because it brings many other problems that we should avoid, like spending above your income and accruing credit bills.
Upgrading our lifestyles the moment there is an increase in income can have good reasons, but usually end up with dire consequences for the person upgrading. This is because it leaves you with little to no savings, and you can even run the risk of borrowing money to keep up.
Refusing to take stock
Our refusal to take stock is a big money mistake that many Africans make, which is sometimes more cultural or societal than personal. The culture of unnecessary splurging, frivolous spending, and money spraying is a big funnel that leads to financial ruin.
Taking stock requires that you take a conscious look at what is being bought, how much is being spent, and for what reason. This way, it would be easier to plan ahead and perhaps not get into a situation where there is no money, and then you'd have to resort to borrowing.
Taking stock encourages accountability and a saving culture and puts you in the know of your finances while discouraging unchecked spending. Binance Pay helps you regulate how you pay out and receive funds, so there's a record.
Saving is easy, but investing may be hard; nonetheless, you can learn it by starting small and gradually increasing your knowledge. Not investing is a money mistake Africans make that ruins our finances and ends with us missing out on achieving our financial goals. This is because most Africans don't have a proper understanding of investment or are very risk-averse.
There are many stories about someone or a group of people who invested their monies in one investment idea and ended up with no yield or no capital at all. As much as these stories are scary, the real investment opportunities are still there and offer significant leverage.
For instance, Binance Earn allows crypto holders to earn compound interest and maximize their crypto gains.
Not having a retirement plan
Thinking about the future and its potential might be worrisome, but it will arrive, and you must have a plan for it, or you will have made a severe money mistake that many Africans make. It is always terrible seeing retirees who can't afford the most basic necessities because they do not have proper retirement plans.
Not having a retirement plan automatically precludes you from enjoying financial freedom in your old age. Instead of enjoying your retirement in old age, you will remain working to afford your needs.
Deutsche Welle reports that pensioners in Uganda receive roughly $10 (about 35,500 Ugandan shillings) each month. However, the Ugandan government's present financial predicament prevents it from increasing the amount or the number of recipients. It would be best if you had a plan for yourself because a government pension plan In Africa is volatile.
While it sounds good to agree that you will not make these money mistakes, the bulk of the work is in making conscious efforts to avoid the errors. It requires that you take the first step. Binance offers a wide range of things that you may use to save or invest in with your spare funds.
To begin staying accountable while earning compound interest, staking, or even simply saving, you must first register and complete Identity Verification. After that, go to Binance and start working toward your financial/cryptocurrency goals.
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