This is 2022 and as the year starts, there are traps that you should just avoid to remain focused on your goals and achieve till the year ends. After a December holiday, many found themselves on the losing end starting the ear having used all your savings and worse even some in debts.
Rina Hicks a financial consultant from Moneywise has some super advice on how you should avoid most common money traps that may derail your financial plans. Below is a list of traps you should try at all costs to avoid in 2022.
Buying a car that you cannot afford.
You know and the question I hear you ask is how do I know what I can and cannot afford? What you can’t afford is a car that you take on loan and you have to take three years to pay it off. Three years is the maximum time that you should take to pay off a loan on a vehicle.
A vehicle is a depreciating asset and two to three years down the line you will not be able to sell it anywhere close to the price that you bought it.
Two to three years and in addition to that if you invested that money in another investment opportunity, you’d make so much more because of reinvesting the earnings that you get from it. So please, don’t take more than three years to pay off your car and if you can let the loan that you take be only on your first car and after that try and buy cars using cash and not taking a loan on it as much as possible.
In fact, I remember hearing somebody saying that if you’re going to buy a new car from a showroom you should be worth at least ksh.100 million and not any less.
Buying A Home That Is Too expensive
The second money trap to avoid is buying a home that is too expensive. A home that is too expensive is one where you are paying more than 30% of your gross income on mortgage interest payments including the repayment per month is what I mean plus the service charge. You shouldn’t pay more than 30%, if you’re paying more than 30 percent, that house is too expensive.
A mistake that we make is when we want to buy our first home, we want to buy a dream home, we want to move our children and ourselves to this beautiful leafy beautiful suburb and the mistake we do with that is that you end up paying for the mortgage for this home and you pay off this home over such a long period of time and for some people the, entire working life.
You know you work for 30-40 years you’re still paying off this house. It’s not right so you need to ensure that you get a house that you can afford to repay no more than 30% of your gross income.
Taking Unnecessary Loans
The third money trap to avoid is this year please guys is taking loans on credit cards, mobile money loans, and also shylocks. Such loans are just so expensive and it doesn’t make sense, unfortunately, a lot of the things that we pay for are not assets using these kinds of loans.
If you can avoid taking credit card loans please do. I know it’s safer to shop online for example using a credit card and if you do then please pay it off within the 45 days that you’re given. If you take a mobile loan pay it off within a month but do not go beyond a month to pay off some of this debt because it is extremely expensive. For credit cards, we’re talking between 3.5% to 4.5% interest per month. If you do the math, you end up paying something close to 70 per year on debt.
I don’t know any instrument that you can invest in or any investment opportunity that will give you that kind of return guaranteed.
Marrying The Wrong Person
The fourth money trap to avoid is marrying the wrong person. The biggest decision you will ever make in your entire life is your marriage partner. Please take the time to make the right decision. Some of the things to make sure that you check are, is this person honest where their financial situation is concerned, do they have debt? Do I even know whether they have debt or not? Do I know what they do?
There are people who marry somebody and they have no idea I’m just in business and you have no idea what business they do. Please take time to ask and if they’re not honest, push the date or change your mind but finances and marriage uh can get a bit stressful.
Marrying the wrong person can trip you up where finances are concerned. If you’re already married and you’re like, I made this decision 13 years ago. Then what you want to do is take time to have money dates and meet and discuss your finances plan together, express your expectations, dream together and then create a plan to be able to help you in your future years where your finances are concerned to be able to achieve the goals that you desire as a family.
Upgrading Your Lifestyle When Your Income Increase
The fifth money trap to avoid is upgrading your lifestyle when your income increases. Remember we said earlier that we’re hoping for a great year. We’re hoping to do well this year and when your income does increase, please don’t upgrade your lifestyle, don’t change your car if it’s not necessary.
Don’t change your house and increase rent if it’s not necessary unless it’s something that you planned before. Don’t upgrade your lifestyle just because your income has increased, otherwise, you’ll not be able to take advantage of the opportunity that you get with that increased income to be able to do the things that you so dream to do like retiring early, being able to be financially free to the point where you can do what you want without having to go to work. That’s what we’re aiming towards, so don’t upgrade your lifestyle. Set the system in place of how you want to live and continue to live that way for as long as you can.
Not Investing And saving
Number six and the final money trap to avoid is not investing and saving. We have to invest and we have to save. So, if you’re out there you’ve saved and you have some money and you’re wondering what do I do with it? There are a number of investment opportunities out there you can scout. There are also a number of forums and boot camps you can go for to learn how to invest your money and create wealth.
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