Personal finance is not a required subject in most high schools or universities in Ghana. This leaves many young adults clueless on how to manage their money, get or stay out of debt and choose the best investment options.
In line with Databank Group of Companies’ mission to empower every Ghanaian to achieve financial independence, Mr. Abdul-Hakkim Alhassan, branch manager of Databank, Tema branch, joined Rev Erskine on the MydMorning Radio Show to share mistakes young people make when starting their financial journey.
Below are the tips he shared:
Taking on too much educational debt: Student loans are a fact of life for many young people, and chances are a lot of young people need to go into debt to further their education. But, while you may need to borrow for tuition and books, the last thing you want to do is borrow more money than you need. You must have a plan for a job or a plan to pay back your debt.
Getting one (or more) degrees without having a plan: Most young people, after first degree, want to pursue their masters or even a second degree but fail to plan towards it. If you cannot afford it, you can consider taking a free online course, which is relatively cheaper.
Waiting to start investing: When you’re young, you may feel like you have all the time in the world to invest for your future or don’t have enough money to start not realizing how much you spend on items like data, entertainment, clothing, etc. But the reality is, it is much easier to grow your money if you start young and allow time to work for you.
Investing in things you don’t understand: While you need to invest to build wealth, you must not make bad investment choices due to inexperience. It’s tempting to invest in get-rich-quick schemes that promise the world or to follow the advice of people on an investment you can’t miss. But, if you don’t understand an investment, you make yourself vulnerable to scams. It is therefore important to ask questions about the investment, where the funds are being placed, the track record of the company, etc. You must also speak to a licensed investment advisor to help guide your investment decisions
Failing to live off a budget: When you’re starting to earn money, it’s tempting to spend it on enjoying life. Unfortunately, failing to take control of money management is one of the biggest mistakes young people make. Most people aren’t really taught how to budget. But, without a budget, it’s much harder to make sure you’re doing the right things with your income.
Learn how to budget in 5 simple steps:
Create a spreadsheet and compare your income and expenses for the period
Track your spending. Write down every purchase you make. Simply tracking what you spend can help you notice patterns, make you more aware of where your money is going, and help you identify if you need to make a change.
Differentiate between your wants & needs. While it seems like a simple distinction, you would be surprised at our ability to rationalize certain spending decisions. Saving money by buying only what you need gives you more flexibility in your budget in the long run.
Resist impulse buying. Don’t make purchasing decisions on the spot without thinking about the consequences.
Stick to your budget.