Critical Dos and Don'ts of Managing Your Money

After finishing studies and finally landing a job, the thought of getting paid is exhilarating. Then the day comes. head to the ATM and confirm that your salary is in.

I remember the first money I had worked for. Seeing that figure on that ATM screen shook me, I could not believe I had gotten to a point where I would have to handle such kinds of sums. So I left it there. Every evening after work I would pass by the ATM to confirm that the money was still there and that it was still mine. 

I have got to admit, I did not take out that cash because I didn't really know what to do with it. The question in my mind was “What next?”

Had I known what I know now, that money could have been spent on things other than what I used it for. Here are some things I learnt later which I could also recommend; what to do and not to do with your money. 

Dos of Money Management

1. Create a Budget and Stick to It 

How is your income spent? Budgeting may not be very fun for everyone, however, it’s necessary.

It’s essential to keep a budget, so you will know how much you have from the income you earn, how and how much you have to spend.

It’s such a common mistake to assume you spend ‘serious’ money only on rent and maybe 2-3 bills.

Fact is, you spend serious money also on food, clothes, the beer you buy on your way from work and that may not be all. All that are money that is supposed to be included and perfectly fit in your budget

Without doing that, you might find yourself with very little to spend for a very long period until your next payday.

2. Save, Save More and Put Savings in the Right Place

Setting aside a portion of your income is one way to wisely manage your finances. You should do this regularly as you continue building a financial cushion and seed for investment. In fact, the savings amount must be integrated in your budget.

What if you woke up one day and lost your job? Or you suddenly fall ill. What will you do? How will you live for that period before you get back on your feet?

There are a lot of other good reasons why you should begin saving. Besides, days will pass and you will have to retire. You need to secure your retirement by setting aside money for that purpose. Saving money for your retirement should be amongst your list of top priorities.

Note that you cannot save without a purpose.You will never get the motivation to keep setting aside money regularly if you haven’t carefully planned out the goals that this money is going to fund. 

Some good reasons for saving include; setting up an emergency fund, building up a children’s education fund, funding your retirement plans, to start a business, creating an investment fund or home ownership.

Depending on what you are saving up towards, you will have to determine where to put that money; it could range from a current account, regular savings account, a Sacco, a money market fund, a fixed savings account, treasury bills and bonds, to real estate, stocks and gold. 

Also Read: Where Do I Keep my savings? The 7 Main Places to Put Your Savings

3. Pay Your Bills on Time

Do you have the habit of paying bills when their due date has passed? Utility bills, and any other type of bills for that matter, have a due date for a reason.

Paying your bills on time saves you from penalties that may have to come out of your paycheck.

If you are servicing a loan, late repayments may lead to penalties that you want to avoid as well as the possibility of hurting your credit history. .

Paying a small portion of penalties may not seem like a huge thing, but doing it so often accumulates to a huge sum which could have been useful elsewhere.

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4. Grow the Money You Have - Invest

After learning how to invest your funds it is important to be able to find vehicles you can use to grow your funds. Vehicles are available in plenty including mutual funds, bonds and bills, stocks, gold, real estate investing or better yet, you can start a business. 

Choice of where to invest this money is dependent on your needs, the time you need your money put in for as well your risk tolerance. 

Investing can gain you passive income that will eventually provide financial security in the future even after retirement.

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Don’ts of Money Management

1. Avoid Impulse Purchases

Buying items on a whim can have a serious negative impact on your finances. The impact at the time of purchasing may not be so much felt, since it’s usually small things that we impulse buy.

Perhaps you went shopping once or twice while hungry and realised later that you bought more items than you had originally planned. However, impulse purchasing might not be so ‘innocent’.

Limited sales offered by stores, special offers or big signs informing you how much you could save if you made purchases right away can heavily affect your purchase decisions. 

Also Read: 10 Tricks to Stop Impulse Spending in 2022

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2. Avoid Unnecessary Debt

There are two sides to this. Taking good debt or bad debt. Taking a debt that enables you to get returns is good debt. Taking on debt that doesn’t, is definitely bad debt. 

If you have the ability to buy something with cash, then choose that option.

You will prevent yourself from paying high interest rates and the possibility of having your property repossessed by the lender in case of default. 

If you always need to borrow money to cover everyday expenses, then what this means is you are unable to depend on your own finances which doesn’t sound good at all. And it is a wake up call to start finding ways of increasing your income, rather than piling up more debt. 

Whether you borrowed money from a bank, a family member or a friend, that is still debt. Failure to pay back that money will result in them losing trust in you, broken friendships or your belongings might be lost to debt collectors. 

Also Read: Good Debt Vs Bad Debt: How to Tell the Difference

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3. Avoid Social Media Pressure

In this life you are in a race with only yourself. No one else. On social media, people tend to show off lavish things and lifestyles in a bid to make a statement of how good their lives are and in a way, it may put pressure on you to start adopting their kind of life even if your income limits you from doing so.

Bowing to this pressure may lead you to start living way above your means and sometimes get you into debt as you want to show others how “awesome” your life is.

Tame this. What you should focus on is being better tomorrow than you are today. That way you will be able to live comfortably within your means.

Besides, who is anyone to judge the lifestyles of other people?

Also Read: How to Deal With Lifestyle Inflation

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4. Avoid Being Too Stingy 

Many people think they are saving money by pinching the penny. Some may buy cheap fuel for their cars from unreliable sources eventually ending up destroying their car engines.

Others may buy food that is about to expire since it’s cheaper and risk getting sick. Buying low quality of anything from car parts, clothes to even living in an unsafe neighbourhood will eventually be more expensive than spending a little more for better quality. 

It is okay to save money but being stingy is a completely different story!

Also Read: 13 Tips to Live Cheaply But Not Look Cheap

WRAPPING UP

The main goal of prudent financial management is to make financial progress. Of course there are many other things to do or not to do with your money, which you should continue learning about. 

Remember, money does not bring happiness but a secure financial future sure does bring you much closer happiness.