FINANCE: 11 Foolish Things You Do to Your Money

In today’s world more and more people are doing things that are going to hurt them badly financially some consciously others unconsciously.

It’s scary how some people do not know that some things they see as normal can actually be a nuclear time bomb ticking in their financial lives ready to blow up anytime soon.

Below are some which you may know and others which you may not know, they are from my personal experience and my research and studies so far in finance.

1. No plan (Budget):
This to me is the genesis of all financial mess. Really as the old saying goes “He who fails to plan has already planned to fail”. As a young person trust me I have suffered from this a lot especially during my early years in the university.
Not knowing how and when to spend your money before you get it can make you miss use it and later lament oh how your money finished, trust me I have been there. So always try to have a plan ahead.
2. Gambling:
This is something I am seeing growing rapidly right now all over the world especially in Nigeria. The truth is you have no known hedge when it comes to gambling. The bookmakers are the ones who have a hedge and know they would make money over time.
The gambler is just depending on luck, and luck is something you don’t want to risk your money on, it’s foolishness to do so.
3. Saving:
“Savers are losers” I remember reading Cash Flow Quadrant TM by Robert Kiyosaki before I got my admission into the university. It was the first time I was reading his book and I had always seen saving money as one day my saving would amount to something big that I can live off from but it turned out I was wrong.
Why was I wrong? It is because I was keeping Cash and the interest I was getting from my regular savings account was lower than the inflation rate and even when I get these interests I noticed I was taxed on my interest gain, “adding Salt to injury”. Saving money means over time you are just going to lose the true worth of your money because of inflation and taxes.
4. Borrow Friends and Family:
I know a lot of people would agree with me on this. It’s a good thing to help a friend or family member financially but it should not be at the expense of your own finance.
I learned this lesson from my dad, it is better to just gift (“dash”) what you can spear than to try to borrow them what they want. Usually from my experience when you borrow a friend or family member's money it’s hard to get your money back and this can cause a strain in your once beautiful relationship with them.
5. Buy Things You Can’t Afford:
This is one very foolish thing common among youths. Buying things on credit is very wrong especially when you know they can’t produce the cash flow to pay for the debt back.
When you buy things on credit you are basically borrowing from your future self, you may look prosperous now but in the near future when it’s time to pay you may be forced to cut your standard of living.
6. Trying to impress your peers:
A lot of youths are also guilty of this, they may not necessarily buy this time on credit, that is they probably have the cash to purchase it but they are buying whatever they are buying just to impress their peers most times at the detriment of their financial goals.
Wasting your money just to impress your folks is a very foolish thing and this can turn to a really bad addiction that you may later find had to break so if you find yourself going for something ask yourself if you are actually doing it because you want to or you just want to show off.
7. Playing too safe:
A lot of people play too safe with their money and think it’s in their best interest. You are avoiding risk but that’s not what smart people do, you should rather learn to manage risk.
When you play too safe you can’t have a good return on your money and sometimes you don’t have any return at all. Managing risk should be your priority instead of being afraid of taking calculated risks.
8. Having no insurance against risk:
Many people underestimate the importance of insurance. Insurance is a risk management tool, one of my best qualities as a trader and investor is my ability to hedge my risk exposure in any investment.
I go into every investment with the idea that something can actually go wrong and I find creative ways to hedge my risk to insure me from a financial disaster.
9. Holding Cash more cash than other assets, is a financial sin:
Yes, this is one very stupid thing a lot of people don’t know they are doing. Holding cash in whatever form more than other more productive assets is killing your money, in fact, it’s a sin in finance. Cash over time loses its value.
Having a little bit of cash to spend is not a bad idea as you can’t spend other assets apart from your country’s currency (cash). The sin here is if all your cash is greater than all your other holdings that’s a recipe for disaster in the long run.
10. Concentrated Risk:
This is another common mistake people don’t know they are making. Most people do not share their risk well by that I mean diversify. When you have money in one currency alone you are at risk of the exchange rate going against you especially if you are a Nigerian.
Personally, I follow the 50/50 ratio rule, this simply means I hedge against exchange rate fluctuation by sharing my assets in 50% naira holdings and 50% Dollar holdings. This simply means when my naira assets losses value my dollar assets gain value in the same proportion and vice vasa.
With this simple hedge, I have cleared the risk of being wiped out by a bad exchange rate on my local currency assets. Just imagine every Venezuelan and Zimbabwean did this before the hyperinflation in their respective countries they won’t be richer but at least they won’t be poorer.
11. Not understanding how money works:
To be sincere the core reason people make these mistakes I have discussed above is because of the lack of true knowledge on how money actually works.
When a person doesn’t know what they are doing especially when it concerns money that is the biggest risk to your finance and it is foolishness not to try to understand how money truly works.

Good to know you read this post to the very end, let me know which of these you are guilty of doing and also share what other foolish things you know people do to their money.

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