With inflation affecting household budgets and the cost of living rising across Nigeria, many individuals are struggling to manage their finances effectively.
Unstable incomes and the pressure to maintain a certain lifestyle make financial discipline more difficult. Avoiding common money mistakes is key to achieving stability and building long-term security.
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Here are 10 financial mistakes Nigerians must avoid to stay afloat, based on research by E-BarcsMFB and BusinessDay.
1. Living beyond your Means
“Living beyond your means” refers to spending more than you earn or can afford, often to maintain appearances or impress others, and can be avoided by tracking your income and expenses, creating a budget, and limiting spending to what you can sustain, remembering that “true wealth is quiet; debt is loud.”
2. Not having a budget
Not having a budget often leads to cash shortages before the end of the month, which can be prevented by using tools such as spreadsheets, budgeting apps like Mint, PocketGuard, or KoloPay, or a notebook to allocate income before each month begins.
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3. Ignoring an emergency fund
Ignoring an emergency fund leaves individuals unprepared for unplanned events such as medical bills, job losses, or car repairs, but setting aside at least 10 per cent of income and gradually building savings to cover three to six months of expenses provides a safety net.
4. Over-relying on “soft loans” and online lending apps
Relying heavily on “soft loans” and online lending apps exposes borrowers to high interest rates and penalties, which can lead to persistent debt, making it important to borrow only for essentials or investments that will generate returns and to review loan terms carefully rather than using loans to fund lifestyle expenses.
5. Not investing early
Delaying investments because they seem suited only for wealthy individuals reduces long-term financial growth, but starting with affordable amounts on platforms such as Cowrywise, Risevest, and Bamboo allows anyone with a smartphone to begin building wealth over time.
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6. Depending only on one source of income
Depending solely on a salary or a single business creates financial risk if that income is disrupted, so developing side businesses, freelance work, or other income-generating activities helps build stability.
7. Not planning for retirement
Not planning for retirement leaves many assuming they will always be able to work or relying solely on faith, but opening a pension account or retirement savings plan and contributing regularly, even in small amounts, can help secure future income.
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8. Spending without tracking small expenses
Spending without tracking small expenses such as snacks, transport fares, and phone credit often results in unnoticed losses, but keeping a record of all spending helps identify areas to cut costs and save.
9. Falling for get-rich-quick schemes
Falling for get-rich-quick schemes often leads to financial losses, but verifying every investment, researching the organisations involved, and avoiding offers with unrealistic returns can prevent such losses.
10. Neglecting financial education
Neglecting financial education leaves people vulnerable to poor decisions about savings, investments, and debt, but learning through books, online resources, and financial literacy programmes can lead to better money management.
