Our 20s are such a rollercoaster. On top of trying to figure ourselves out, we are also expected to begin our careers and manage our finances. We soon realize that the few personal finance courses we studied in school did nothing to prepare us for real life. We end up just winging it and learning how to survive on the go. I’ve made my fair share of financial mistakes at my young age of 26. Here are a few of them and how I am trying to overcome them.
Soft Money Loans
Until a few years ago, credit and debt was not readily available to the youth. Options like bank loans and credit cards were only accessible to those that were more financially stable. Mobile service providers like Safaricom have really improved the way in which people transact money. It is now really easy to get soft money loans online through them. One of the most commonly used services is Fuliza. The more you Fuliza, the more your credit limit grows. A lot of us end up using these soft loans for entertainment like alcohol and eating out. Imagine going on a whole vacation using a soft money loan. The interest rates on these loans are super high which makes paying them back very expensive. The worst part about this is that, if you receive any cash into your M-Pesa when you have a Fuliza balance, the cash is automatically deducted to pay your debt. There is no option to pay back the credit monthly or on a predetermined date which leaves most of us in a cycle of debt with very high interest rates.
Moving out of home unprepared
The freedom to have your own space and be financially independent from your parents is a goal that us 20-somethings really seek out. I always thought that moving out would mean that I’ve finally “made it” in life. I envisioned a happy ever after. Wow was I wrong. Even if I had saved up quite a bit of money before I made the move, I was not prepared for the constant financial burden that came with it. I was so used to never having to worry about housework, groceries or cleaning equipment when I lived with my parents. I definitely took for granted how much they invest into running a home. I struggled to find extra money to furnish my apartment the way I wanted and was barely keeping up with my monthly expenses. I had not properly calculated my expenses and budgeted wisely so I found myself with no savings at the end of the month, desperately waiting for my next pay-check. Things got so bad one particular month that the electricity in my apartment was cut off due to lack of payment. Oh my gosh, trying to liaise with KPLC to come and reinstall it even after I had paid off the balance took days of begging, pleading and constant phone calls with their uninterested customer care personnel. I’m now back home living with my folks which is one of the best financial decisions I made this year. I am able to focus my earnings on other investments as opposed to living hand on foot , wasting money on rent and basic necessities that are freely available to me at home.
I think a lot of us are heavily influenced by peer pressure and the desire to fit in during our 20s. You thought that phase would end in high school but soon realize just how obsessed you become in creating this perfect image of yourself for society. I too fell into this trap. I could have definitely saved more and had more investments by now if I was smart about how I was spending my money. I remember when I was still living in Cape Town, I managed to double my income streams within a year of getting my first job. I felt like I was on top of the world. I quickly doubled my expenses by moving to a much more expensive neighborhood. Life in Sea Point was very flashy, expensive and tempting! There was pressure to enjoy live music, sundowners and dining out every other day. It had been my dream to live in a sea facing apartment at Sea Point and girl didn't I make my dream come true. My rent went up, my entertainment expenditure went up and since I was living with two men who loved to feast on my food, my groceries budget also increased. Soon I became overwhelmed and couldn’t keep up with it all, finally making the decision to move back to Kenya so that I could save and invest my earnings.
Saving all our money in a savings bank account
I think a lot of us have made this mistake. During the first year of the pandemic I was so hell-bent on saving 80% of my earnings. This was very possible as I lived at home with my parents and we were barely spending money on entertainment and travel. I wish I was smart enough to diversify how I was saving my money. Banks really offer us non-existent interest rates on our saving accounts. My money was just sitting at the bank with no prospects of growing itself. Now I know better. Options like money market funds are a great way to diversify and grow your savings and emergency funds.
No pension fund
More often than not, the youth usually forego deducting some of their monthly earnings into a pension fund. Maybe it’s because we believe that we are still very young and have our whole life ahead of us to save for retirement. I really don’t want to be working in my 60s. I have learnt that because a pension fund has compound interest, the earlier I start saving towards it the earlier I can retire.
Black tax
Black tax continues to cripple a lot of the youth once they start working. It usually affects older siblings who have now become the primary earners in the family. Apart from their personal expenses, they also have to pay for their siblings and parents’ upkeep. What's even worse is the sense of entitlement younger siblings can sometimes have over your money. To them your earnings are their rights! I think what’s really important in this case is setting boundaries with your family members to stop you from depleting all your resources. Be a bit selfish.
These are just a few of the financial mistakes most of us make in our 20s. Knowing our flaws is the first step to remedying the situation and attaining financial freedom.
