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11 Worst Money Management Mistakes to Avoid

11 Worst Money Management Mistakes to Avoid

Does the thought of looking at your bank account receipt after a transaction make your heart race? Do you quickly delete M-PESA messages after a transaction, so you do not look at the balance? 

Do you trash the receipt at the supermarket just quick enough, before giving it another look? Or do you suddenly find that you are out of money and cannot tell how you spent it? Have you gone back to your bank/mobile money statements to try and figure out where a huge chunk of your money 'disappeared' to?

If one or all of these are happening/have happened to you, then you probably are making mistakes with managing your money. Let us take a closer look at some of the mistakes you might be making, even unknowingly.

  1. Not Having a Budget

Not having a budget is probably one of the surest ways of running into financial distress . Without a budget, one is most likely to be unprepared for surprises.

If you have no idea how much you spend every month, it will be difficult to create realistic savings and investment goals.

Not having a budget can also lead to impulse buying, further creating a dent in your finances. Even worse, you might end up in debt.

Tip: Draw up a budget and purpose to stick to it. Your budget will depend on your income, and total expenditure. So it goes without saying that you then need to start tracking your expenses and keeping a record so you can get the true picture of what your monthly expenses look like. Also, make sure you budget to zero before the month begins - this includes everything from your contribution to your emergency fund to leisure. 

  1. Spending On Stuff You Don't Need

Failure to distinguish wants from needs can lead one to spend on unnecessary items, e.g., a luxurious pair of shoes that you only wear once a year. 

The pressure to keep up with peers or societal expectations of what you should possess at what point in life, where you should live etc. contributes to many unplanned spending decisions. 

For instance, the fact that most in your circle of friends already have cars may bias you towards buying one even if you may not necessarily need it. Worse, you may end up making purchases, moving neighbourhoods etc. just to match those standards when you actually cannot afford to do so. The result is almost always getting into debt - debt that you didn’t need in the first place.

Tip: Start by truly understanding your wants and needs. Make a list of each and evaluate their usefulness and also potential future dividends you can reap from them. You want to prioritise your needs in your budgeting before figuring out if you can afford a want and further if you could put that money to better use.

  1. Not Tracking Your Spending

To have a successful budget, one needs to track where the money goes, and what it buys each month. If you're not tracking your spending, even the very small purchases you make, you could easily be overrunning your budget unknowingly. 

Tracking your expenses will give you a clear picture of where your money is going. Thereafter, you can make adjustments where need be. Your budget is as good as your expenditure tracking ability.

Tip: You could simply get started on tracking your expenditure on pen and paper - studies show that handwriting engages the mind more than typing on a computer. You have some extra mental presence as you plan out your money goals. If that doesn’t work for you, consider installing a budget app such as PocketGuard, YNAB (You Need A Budget), or Mint. Many are available for free. 

  1. Maintaining your spending habits when your income has gone down

Many people tend to try not to lower their spending and adjust their budget accordingly, after their income has been reduced For instance, after salary cuts experienced in the wake of the COVID-19 pandemic. Premium subscriptions and memberships or some leisure activities may need to take a pause until you can increase your income.

Tip: If you are dealing with reduced income, avoid feeling broke by making significant changes sooner rather than later.

  1. Not Setting Goals

If you do not set specific goals, it won't be easy to attain financial freedom. This is because these goals give you steps to work towards. These should be the reason you wake up every day and put in the hard work at whatever you do, so they should challenge and motivate you. 

Tip: Make a list of goals you want to achieve. This could be either short term or long term. In turn, it will help you stay focused on financing the goal. Take time to set solid financial goals and pair them with a tracking plan with milestones that help you visualise progress. Remember, you can review, adjust them as you wish.

  1. Ignoring Higher Income Opportunities

Always be on the lookout for possibilities of making more money. Making more money means you can stay away from debt and move you closer to the financial goals you have set for yourself.

If you can bargain for better pay at work, do it. Can you manage a side hustle after-work hours or over the weekend? Start small and give it a try. It is generally a good (nay, great) idea to have more than one revenue stream. So, stay hungry for more - learn basic investing skills too. 

Tip: You can look for side hustles that do not require your physical presence if you already have a 9-5 job. Here are a few examples. Even more fun is monetising your hobbies a

such as these.

  1. Borrowing Money

Borrowing money, especially when you have no guarantee of paying back, can dent good relationships between family and friends. Unless it is an emergency or what you lack is a need, stay away from borrowing.

Tip: Try as much as possible to stay within your budget, and try to look for alternative means of earning more money. If you must borrow, take some time to get the best deal from the lenders available to you. It is even easier if you use the Money254 loan comparison tool

  1. Not Having An Emergency Fund

Not having an emergency fund means that anytime a financial emergency occurs, let us say a medical accident, or car breaking down, you cater for it straight from your pocket, or from your savings account. If none of these is enough, then you might find yourself going into debt.

Tip: Set aside a different account for emergencies. Once you get paid, contribute religiously to this fund. It will grow bigger, with time, earning interest, and save you if a financial emergency occurs.

  1. Not Saving and/or Not Investing

It is essential first to save money and then invest in the right places. These may include bonds, stocks, real estate, or even starting a business of your choice.

Saving in a high yield account also means that your money grows even more over the years.

However, if your expenses are higher than your income, then you will have nothing left to save and/or invest.

Tip: Get your costs in control, so you spend less than you make and save the balance.

  1.  Letting Payments Pile Up

If you let payments pile up, it only hurts in the long run. You will have too many bills to cater for, from a not-increasing pool of money, leading to too much pressure.

Tip: Set up automatic payments to take off some pressure.

  1.   Ignoring Insurance

Not having the right insurance and in the right amount is always a huge financial risk. Because if a significant accident, whether health or property-related occurs it could cripple you financially.

Nevertheless, remember not to over-insure. Insure only what you can't afford to lose. That means having enough insurance on big items such as your vehicles, homes, health insurance, and life insurance.

Tip: Scout the markets for an insurance type that suits your needs. Be careful not to fall into the traps of sweet-talking insurance sellers. Know what you need, and go only for that. We are already hard at work creating a searchable database of all insurance products in Kenya for your convenience. Keep checking the Money254 homepage in the coming weeks or subscribe to our newsletter to receive an update when this insurance comparison tool is up. 


If you checked most, all, or even just some of the above boxes, then it is time to go back to the drawing board and re-evaluate your money management skills. It is never too late to rectify these mistakes.

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Eunniah is an experienced business writer and editor. She is also a published author with two titles under her belt; Breaking Down and If My Bones Could Speak. You can find Eunniah on Twitter @Eunnyversal

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