Cash mistakes that the rich don’t make
By George Kiongo | June 28th 2019
Who doesn’t want to avoid unnecessary expenses like millionaires do?
However, while we’ve all heard the advice about not spending as much as we earn, faithfully following a budget, and all that other good stuff, most of us tend to forget a lot of it.
But if you’re sick of having to live hand-to-mouth and can’t figure out how to squeeze a little bit more out of the money you do have, maybe you’re making some money mistakes that you can correct. These are some of the expenses the rich avoid.
1. Paying bank fees
A lot of us pay bank fees, yet we’re not taking advantage of the benefits tacked on to these costs.
It may not seem like much on a monthly basis, but if you’re looking to clean up your expenses column and stick to what you absolutely must pay for, then saving on bank fees is a smart move.
You can play by the bank’s rules to avoid ledger fees, which may mean keeping a certain minimum balance or limiting the number of withdrawals you make in a month. And remember to review your statements for any errors.
2. Sticking with a low-interest savings account
In an era of capped interest rates, there’s also a minimum amount your deposits in a bank should attract. At the moment, it’s 6.3 per cent.
If your bank is giving you less than this, then you need to shop around for a better deal. Also, confirm with your bank if the savings account you opened is still designated as such, and wasn’t reclassified as a current account when interest rate capping came into effect. Every shilling you earn counts.
3. Making poor real estate decisions
Many Kenyans hold on to the dream of owning their own home. But before you sign up for a mortgage or sink your life savings into purchasing a house, be sure you’re making the right decision.
There are no guarantees that the price of your home will increase, so don’t saddle yourself with what’s basically a dead investment. If you’re not moving to your rural area, don’t sink millions of shillings into building a house you won’t occupy for decades – you could put that money to better use.
And be wary of cons in the real estate sector. Do your homework, and where necessary, enlist the services of an expert.
4. Paying inflated interest rates
Mobile money loans have generally been a lifesaver, but they’ve also made getting into debt that much easier.
While the temptation to borrow from one of the many mobile loans platforms may be strong, do your math and settle on the application that gives you the best rate.
And sometimes, you could borrow from family or friends at a friendlier interest rate. Explore your options to keep your debt levels as low as possible.
5. Buying into designer labels
Few people can tell the difference between an original Hermès Birkin bag and a knock-off, so unless you can absolutely afford the $10,000 (Sh1 million) starting price without breaking the bank, don’t bother.
Extend this attitude to products as basic as coffee – you don’t get any richer by buying an expensive cup of takeaway coffee; cut your costs by carrying your own brew or buying from less established outlets.
6. Flirting with credit card debt
Swiping plastic to pay for your purchases can be terribly addictive. But while your limit may be high, stay within it. Don’t spend more than what you can pay back without breaking a sweat – you don’t want to try keeping up with credit card interest payments.
Also, when getting a credit card, find out from you bank how you can avoid some of the attendant costs, such as joining fees.
7. Falling for sales lingo
When buying your electronics, salespeople will sometimes try to get you to pay for things like extended warranties. But before you fall for this, research the kind of coverage the product comes with, and its reviews online. You may find you don’t need to pay any extra to keep the product in top condition.
Also, before deciding to splurge on items that are on ‘sale’ or are ‘up to 70 per cent off’, do some comparison shopping. You may find the product cheaper at another store.
8. Impulse buys
We all know we should never buy anything on impulse, but it can be hard to help yourself when you walk into a supermarket to pick milk but know you’ve got money in your wallet and no plan for it.
One of the best ways to avoid impulse buying is to use a shopping list and stick to it. You can also leave your cards at home and carry just the cash you need, as well as plan your meals in advance to keep your food costs low and minimise the number of times you need to step into a store.
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