Advocating for financial education has increasingly become an important mission in my life. This newly found passion was inspired from valuable lessons I’ve learnt from the seven biggest financial mistakes made in my own life. As a finance graduate, the expectation is that because I am more financially literate and exposed to basic financial concepts such as personal financial management, I would make better financial decisions. However I was still prone to the financial mistakes many young professionals make, despite my financial qualifications. I’ve learnt that debt is psychological and a habit that can quickly accelerate out of control if not managed well.
The first financial trap was opening a clothing account with a local retail store. My reason for opening the account was to buy clothes that would help me be on par with my colleagues- to look professional in a fiercely competitive corporate life. I convinced myself that “if you look good, you do well” which worked for me and helped me to manage the guilt of doing this, when basic finance taught me of finance charges and costs associated with debt. At first it seemed manageable, operating a credit limit of LSL2 000 (equivalent of 2000 South African Rands) where my monthly instalments amounted to LSL200 per month. Before I knew it, things quickly spiralled out of control and my credit limit had increased to LSL15 000. The reality was me paying ridiculous instalments of LSL1 500 to LSL2 000 per month from a net pay of LSL4 900.
The second financial trap was without a doubt my car loan which I could not afford. Living with my sister then and with a net pay of LSL4 900 per month, I can honestly say I was in no position to commit myself to this kind of financial commitment. The pressure during your 20’s is insanely ridiculous, especially when you see all your university friends progressing and buying fancy cars. And again, the pressure got the better of me and I became irrational.
Working for a financial institution, I used the opportunity of preferential interest rates and longer repayment terms to buy a car I could not afford. Yes, I could service the monthly instalment of LSL2 500 for the car, but soon realised that it is not only about the instalment but petrol, insurance and monthly maintenance of the car- also not forgetting to treat the car to a weekly wash. All of which I could not afford. Sadly, I had to depend on my sister not only for petrol, but for ALL my monthly toiletries too. THIS WAS PREPOSTEROUS!
As if my financial woes were never ending, the notion of being young and been seen at every social gathering also got the better of me. Every young person knows that going out frequently equates to more likes on social media, but equally comes with the pressure of dressing up and spending money on drinks and food. When I was offered a credit card because I was a young professional with potential, this seemed like an opportunity I couldn’t turn down.
Again, I ignored ALL the teachings of a three year Bachelor of Commerce (BCom) qualification, convincing myself that I had this under control. The irrationality of my decisions led to financial distress- unpaid debit orders, excess on my current account and revolving debt. This is a situation that should not have happened in the first place.
I should be ashamed, because I should know and do better. And I am! I cannot even attribute my actions on the folly of youth. I have accepted my mistakes and I have learnt from them. More importantly is my eagerness to share my story with other young professionals and use the lessons I have learnt to make a difference. I know that my bad financial decisions were influenced by psychological and emotional factors, which led to irrational behaviour, a new development in finance called Behaviour Finance. More on this topic will be discussed in a series of articles to follow when I discuss the remaining 4 financial mistakes made during my 20’s. Till then, challenge yourself to confront the financial mistakes in your own life.
