1. Not Having a Budget
Why it’s a mistake: Without a budget, it’s easy to lose track of where your money is going. You might end up spending more than you earn or be caught off guard when bills are due.
How to avoid it:
Track your income and expenses: Write down everything you earn and spend each month. Set limits: Allocate specific amounts for categories like groceries, entertainment, and savings. Use apps: Apps like 26s or GoodBudget can help you track your spending and stick to a budget.
Example: Let’s say you don’t budget for entertainment and end up spending too much on weekends out with friends. The next month, you’re short on rent. Setting a fixed limit for fun activities each month helps you avoid this.
2. Living Beyond Your Means
Why it’s a mistake: Spending more than you earn is one of the quickest ways to get into debt. It’s tempting to buy things on credit or get a loan for a new car, but that debt can snowball quickly.
How to avoid it:
Know your limits: Don’t live above your means. Make sure your monthly spending aligns with your income. Save for big purchases: Instead of buying on credit, save up for expensive items like a new phone, car, or a holiday.
Example: If you earn R15,000 a month, don’t get a car loan for R8,000/month. Instead, find a car you can comfortably afford within your budget. Overstretching yourself financially can lead to unnecessary debt.
3. Not Saving for Emergencies
Why it’s a mistake: Emergencies happen, whether it’s an unexpected medical expense, car repairs, or job loss. If you don’t have savings set aside, you might have to take on debt to cover these costs.
How to avoid it:
Build an emergency fund: Aim to save three to six months’ worth of expenses in a separate account. Start small: If you can’t save a lot right now, start by saving R200 or R500 a month and increase it over time.
Example: If your car breaks down unexpectedly and you don’t have any savings, you may have to take out a loan or use your credit card. But if you have an emergency fund, you can easily cover this without going into debt.
4. Ignoring Retirement Savings
Why it’s a mistake: Many South Africans don’t start saving for retirement early enough, assuming they have plenty of time. However, the earlier you start saving, the more your money will grow over time thanks to the power of compound interest.
How to avoid it:
Start as early as possible: Even if you’re in your 20s, start contributing to a retirement annuity (RA) or pension fund. Increase your contributions over time: As your salary increases, increase your contributions to your retirement savings.
Example: If you start saving R1,000 a month for retirement at 25, by the time you retire at 60, you’ll have a significant amount saved up. But if you wait until you're 40, you’ll need to save much more each month to catch up.
5. Failing to Protect Your Income
Why it’s a mistake: Your income is your biggest asset. If something happens to you, like a car accident or health issue that prevents you from working, you need financial protection.
How to avoid it:
Get insurance: Consider getting life, disability, and income protection insurance to ensure you’re covered in case of unforeseen events. Review your coverage: Make sure your insurance policies align with your current needs.
Example: If you're a sole breadwinner and fall seriously ill, income protection insurance can provide you with a portion of your salary while you recover. This can help you avoid financial strain.
6. Not Tracking Your Credit Score
Why it’s a mistake: Your credit score is crucial when it comes to securing loans or applying for a home loan. If your credit score is low, you may face higher interest rates or be denied credit altogether.
How to avoid it:
Check your credit report: Regularly check your credit report with the major credit bureaus like TransUnion, Experian, or XDS. Improve your score: Pay off debt on time, reduce your credit card balances, and avoid applying for unnecessary credit.
Example: If you want to buy a house but your credit score is low, your mortgage application may be rejected, or you’ll face high interest rates. By keeping track of your credit and improving it over time, you increase your chances of getting better loan terms.
7. Not Investing
Why it’s a mistake: Many South Africans avoid investing because they think it's too risky or complicated. However, not investing means you miss out on the opportunity to grow your wealth over time, especially in the face of inflation.
How to avoid it:
Start with small investments: Consider starting with a tax-free savings account (TFSA) or investing in unit trusts or exchange-traded funds (ETFs). Diversify: Don’t put all your money in one investment. Invest in different assets to minimize risk.
Example: If you invest R500 a month in a unit trust, over time, your investment grows due to compound interest. Not investing means missing out on this opportunity.
8. Not Having a Financial Plan
Why it’s a mistake: A financial plan gives you a roadmap to follow. Without a clear plan, you might feel lost when it comes to your finances or make decisions based on short-term desires rather than long-term goals.
How to avoid it:
Set clear goals: Decide what you want to achieve - buying a home, paying off debt, saving for a child’s education - and create a plan to reach those goals. Review and adjust your plan: Life changes, so make sure your financial plan evolves with your needs.
Example: If you have a goal of buying a house in five years, your financial plan might include saving for a deposit, reducing debt, and improving your credit score. Without a plan, you could easily get sidetracked and miss that opportunity.
Financial mistakes can set you back, but they can also serve as valuable learning experiences. By understanding common financial errors and how to avoid them, you can build a solid foundation for a secure financial future. Start by budgeting, saving, investing, and protecting your income today to avoid these common pitfalls.
Questions after the interview:
At the end of an interview there is usually an opportunity where you can ask any questions you might have. This is a great opportunity to show the interviewer that you are interested in the position as well as the company. It is a good idea to prepare a few questions before the interview – this can be done while you are doing research on the company.
Your questions should show the interviewer that you are a good candidate for the position. Try and avoid questions that are based on your personal needs and preferences, for instance:
- How much leave will I get in a year?
- Will I be considered for promotion in my first year?
- When will I get an increase?
- What time can I leave in the afternoon?
These questions are inappropriate at this stage and will probably raise concerns on the side of the interviewer. Should you be the successful candidate then all these questions will be answered in your letter of appointment so don’t waste this opportunity by asking these basic questions.
If the position is an entry level job or very junior then you are welcome to ask questions in line with the position, for instance:
- Why did the previous person leave the position?
- What would the successful person be tasked to do in a typical day?
- How does this position fit into the department and / or company?
- Could you explain the company structure to me?
- Is there any further education assistance or support?
If the position is more senior then you can prepare question around the following themes:
- current issues that will face the successful candidate;
- inter-personal challenges in the department;
- any process, technology or people challenges that needs to be attended to urgently;
- key result areas that need urgent attention in the first few months;
The above information should get you started. Prepare a few questions so that you can show your worth. Good luck with your interview!
