Most of us are concerned about how we can increase our income, be it through a salary raise or better returns on investments. However, not all of us are equally concerned about how we spend our money. Sure, we might track our spending and try to reduce our overall monthly expenses, but very few of us actually understand that some of the purchases that we see as important are really a massive waste of money. Due to societal expectations and lack of financial literacy in younger people, your money is probably being spent on a lot of unnecessary things. In an event where you are faced with an urgent need for cash for a crucial need or emergency, you would have to resort to loans because you have already spent your money acquiring useless material goods. Therefore, it is not enough to simply be careful about how much you spend but also what you spend it on.
Here are some things you should definitely not waste your money on in this day and age.
1. Credit Card Interest
Most young people are so excited to get their hands on their first credit card which allows them a host of benefits, that they simply get carried away. The usage of credit cards has been glorified in modern media and advertisements, where anyone can seemingly purchase any item no matter the price with a simple swipe of their card. None of these ads or films ever show how the buyer paid these cards off. What inexperienced credit card users don’t understand is that no matter what you purchase, your credit card bill must be paid off in full each month without fail. Failing to do so will incur very high interest and late payment fees which will be very difficult to pay once it accumulates. If you wish to purchase something using the credit facility provided by your credit card, ensure that you convert your purchase to an instalment scheme (ideally, an interest free one which is offered by partner outlets or during seasonal offers) that will split the value of your purchase over a selected time period. (Read here : Credit Card Mistakes You Might be Making)
This is the only correct way to use credit cards. Too many young people assume that they can get away with paying credit card interest each month but it is a colossal waste of money. The same principle can be applied to online cash loans from lenders like OnCredit.lk - these places are really great in times of need but make sure you pay it back on time to avoid interest and late payment fees.
2. Splurging on Branded Items
While there is no harm in treating yourself to a branded item once in a while, if you have a habit of valuing items simply by looking at its brand, it’s a surefire way to end up throwing your money into a blackhole. Something that a lot of people don’t realise is that a famous brand name does not always equal better quality. There are numerous branded items which simply don’t last that long, especially in our climate. For instance, many branded handbags, shoes and wallets costing tens (sometimes hundreds) of thousands of rupees will start peeling in just a few months due to the humidity. You would end up wasting a lot of money to replace these items in a short time period, when their local, unbranded equivalents can last you much longer.
If you do wish to spend your money on branded items, make sure you check the quality and durability to ensure that your money is being put to good use.
3. Doing Things for Show
At some point in our lives, we’ve all been compelled to do things simply because of how it looks to outsiders, be it spending more than you can really afford on a showier phone or a better car. There are even people who feel the need to visit selected places, go on trips to specific hotels or incorporate certain things into their lifestyles (sign up at the most expensive gym, throwing lavish parties etc.) just to keep up appearances. If you ever find yourself falling into this cycle, you need to take immediate steps to break out of it or you will find yourself needing to take out personal loans to fund your overreaching lifestyle. Start with the small things - you don’t need to have a daily cup of coffee from that expensive Barista to carry into your workplace - and then become comfortable in buying what you can afford. Once you align your purchasing habits to buy things that suit your needs (and not those of other people) while being within an acceptable price bracket, you will end up saving a lot of money.
What you need to remember is that if you continuously try to keep up with your wealthier counterparts, they will keep upping their game or look down on you for trying too hard. Authenticity and straightforwardness is always appreciated.
4. Mistaking Liabilities for Assets
A lot of Sri Lankans are taught from an early age that having a house, a car and a grand wedding are major life goals. While there is nothing wrong with spending money on things that add value to your life, far too many people spend money that they don’t have in order to cross these things off their lists. What many people don’t realise is that spending money on a car, house and a wedding is a huge expense that can rarely be justified in economic terms.There is no denying that having a good house and a car makes life very convenient but for the amount of money that they cost, the returns are very poor. While a house can sometimes be considered an asset (if its value appreciates over time enough to cover the initial cost as well as maintenance costs), vehicles can hardly be anything but a liability. The prices of vehicles are at an all-time high in our country and their resale value (and usability) will keep decreasing over time.
Wanting a good house, a nice car and an enjoyable wedding day is completely understandable; however, it should also be understood that there is hardly any way to financially justify these things when looking at it from a return on investment point of view.
It’s okay to make a few financial mistakes early on in your life - you can most likely bounce back from most of these. But avoid falling into any of the above traps as they can prove to be a challenge for many decades of your life.