Common Financial Mistakes Young Kenyans Make

The 20’s and 30’s are a golden decade where most foundations are laid and set the stage for the latter part of our lives. It could be health goals, relationship goals, career goals and even financial goals. Like did you know staying healthy in your 20’s is strongly associated with a lower risk for heart diseases later on life?

Today we’ll be focusing on financial management and financial mistakes young Kenyans make in their 20’s and 30’s which in turn come back to haunt them later on in life leaving them in a less than comfortable retirement. With life expectancy in Kenyan rising to close to 64 years, setting oneself up well early on in life will make the difference later on in life.

Lack of a Savings Plan

The first mistake and possibly biggest young Kenyans make in their 20’s and 30’s is the total lack of a saving plan whatsoever. Like Warren Buffet always says don’t save what is left after spending but spend what is left after saving. In literal sense what he tries to advocate for is having a budget; where you first of all put money aside for your monthly running expenses like utility bills and then putting it into a savings account. Saving has to be done with a goal in mind, mindlessly putting away money without an objective will not hold for long, the same savings account will be depleted by an impulse purchase.

Also make sure to follow your budget to the letter and learn to save with an end plan. No need to have a lot of money sitting on your current account, which is not multiplying. As one established Kenyan Lawyer Evans Monari once said, give your money to an expert who is in a better position to make it work for you. There are several options that offer higher returns on your savings, don’t just put money in a basic savings bank account and leave it there. You could be getting 50% more on your money using common funds and Cash Management Solutions (CMS). Consider life insurance and pension policies too, they are great for longer term saving and enjoy good tax benefits, meaning you are taking home more of your income instead of surrendering it to the tax man. The local education curriculum does not teach personal finance but most of these common habits and lessons can be picked up from the Internet.

Chasing Money And Instant Gratification

In this new age of social media and narcissism where everybody’s intent is to show off their prized possessions and fancy lifestyle, many Kenyans in their 20’s are under a lot of pressure to step up to societal expectations and feed off that over bearing monsters that is snapchat and instagram. In that case their motto becomes money over everything, which has dire consequences later on in life where your mindset is purely stuck up on chasing after money. At this stage in life, the focus should be on your passion or taking up a job with low income but a lot of potential for growth, skills development, job security and great exit opportunities. The world of social media has created a culture of instant gratification which is a clear trap, leaving one with very little to show for all their years of work and experience.

In chase of quick money, many people turn into gambling and betting. So many unfortunate stories have been told of individuals and families losing their livelihoods to betting houses lured by the premise of the odds of quick and instant cash.

Investing in yourself and adding more value to your career/talent you may not pay off immediately but the payoff will be many magnitudes bigger in the future.

Focus on Bills and Fun

Another mistake most young Kenyans make is just focusing on paying utility bills, many young people have become prisoners to monthly. Most have fallen victim to society pressures and lifestyle inflation, living lives that they cannot afford. While this is a mandatory part of adulting, paying your bills that is, mismanaging it can leave the rest of your finances in an anemic state. This can have dire consequences later on in life when you have no savings, investment portfolio or even any financial goals. Earning enough money to pay bills and have fun should not be the objective or be an achievement point in your life. The 20’s and the 30’s is the best place to set long-term financial goals, learn more about investments and take risks as you brace yourself for the future.

Total Disregard For Health And Wellbeing

Yet another common mistake young Kenyans make in their 20’s and 30’s is totally disregarding their health. While they are probably busy with a lot of pressure from work and lots of social activities and parties to attend, it’s advisable to set aside 20 to 30 minutes in their busy schedule to exercise. It could be simple exercises like jogging every now and then or even basically just walking to work. Abstaining from sugar and only engaging in junk once in a while is also very important in creating healthy regimen which can go on in your 40’s and later on in life. The 20’s form a good building block for this as first of all it creates a working formula, ignites self-control and ensures you are set up for the future so once in a while it’s okay to skip happy hour at your local for an evening walk in your neighborhood.

Majority of young Kenyans in their 20’s and 30’s don’t see health insurance as a priority but in actual sense it really is. At this age, one has little disposable income or savings so something like an accident or serious illness could cause a great dent in your financial position not to mention the untold physical pain and psychological and emotional stress. Many stories have been told of well to-do individuals and families that have been left in mountains of medical debt after a grave illness. Such unfortunate events mean you have to borrow from family and friends who might not be forthcoming; remember they have their own problems. A comprehensive and affordable health insurance plan would ensure you get the best medical care and recuperation at no extra cost in such trying times.

One Source of Income

Lastly, another key component to financial freedom a lot of Kenyans in their 20’s totally disregard is the importance of having multiple sources of income instead of one, the monthly salary. Looking at most of the successful businessmen and women and self-made millionaires, a majority of them will have interests in multiple businesses. Diversification is every investor’s key measure in a portfolio, it should be yours too if you are considering building any real wealth. While many financial advisors preach about the savings culture, those who advocate for wealth creation know that earning power is the real driver for wealth creation.

Having multiple income streams makes a lot of sense and most people in their 20’s and 30’s have the potential to juggle up to 3 jobs, a main job and at least 2 side hustles. So instead of spending an entire weekend lounging at home on social media, television and video games, sacrifice a bit if that time to leverage on your skills. Join the freelance community, horne your existing skill into a sellable idea. Take up part time lectures in your neighborhood college or subscribe to online writing platforms like i-writer and Fiverr. You don’t have to go at it alone, join up with a friend or two and start a small side business to generate some extra revenue. Having multiple sources of income not only gives you that sense of security but can be your saving grace when the unfortunate times like retrenchment, sacking come around.

What other common financial mistakes young people make do you think we might have left out?