Adulthood is punctuated with a variety of money decisions like choosing how much to save, choosing what car to buy and deciding when to start a family, so making the occasional money mistake is inevitable. In order to help you avoid some of these mistakes, I have highlighted the 5 biggest money mistakes people make:


Mistake 1: Never Setting Financial Goals

Never setting financial goals leaves people without a real purpose for their money; how they spend it then becomes more situational, based on circumstance and less under their control.

Everyone has financial wants but few people have financial goals. The difference is that financial goals include a target and the steps to achieve that target. You need to give your money direction to move from one step to the next financially.

For instance, if you want buy a car, you’ll need to have a target (what specific car you want) and steps to achieve that target (how long you will have to save to afford it) in order to make that car dream a reality.

Write down your financial goals for the next six months or next year, then start working towards your target; doing this is the starting point to breaking your financial wants down to achievable goals.


Mistake 2: Not Knowing Where Your Money Is Going

Not knowing where money is going is a common money mistake people make and the simple solution is a budget. Having a budget helps people take control of their financial situation and helps put an end to living from salary to salary or living beyond their means.

A budget provides awareness of where your money is going and helps you prioritize financial decisions. This may sound daunting, but it’s easy if you follow the 50/20/30 Rule, which is flexible enough to fit any situation.



Having a budget will help you track your spending and identify were you can cut down. The first few months of budgeting may take some extra effort, but with practice you will eventually create a budget that actually works for you and helps you gain control of your financial situation.


Mistake 3: Thinking You Can Start Saving Later

A lot of people feel saving can be put off till later in their lives when they earn more money. However, this is a mistake because although your income increases as you get older, your expenses increase as well.

When it comes to investing in your future, time is your most valuable asset. The earlier you start saving, the better; not just because it gives you more control over your finances but because it helps protect you against financial emergencies.

Financial emergencies, such as losing your job, are more costly the older you get so it is advisable to start saving towards an emergency fund (equivalent to six months of your income) as early as possible.

Please remember that your savings should be sent to a separate savings account. If you find yourself tapping your savings often, reduce your contributions. It’s better to put ₦40,000 into savings that you know you will not touch, than to put ₦50,000 into savings only to take ₦10,000 out almost every month, the key to successful saving is consistency.


Mistake 4: Assuming that A Good Salary Means You Are Financially Secure

A common misconception is that once you earn a good salary, you will be financially secure. But a good salary is only part of being financially secure; it provides you with a good foundation to achieve financial security through effective saving and budgeting.

Moreover, jobs aren’t 100% secure and people get laid off all the time. Increasing your sources of income will help you increase your financial security and “put your eggs in multiple baskets”.

Some options for new sources of income include freelance work, offering coaching services in your area of expertise, selling creative products and investment activities, which leads us to our next mistake.


Mistake 5: Not Investing Your Money

A study illustrated that people in their 20s show a certain risk aversion to investments despite having time on their side to capitalize on the power of compounding, which I’ll elaborate on soon. The study concluded that the lack of risk tolerance in millennials stems from a lack of financial understanding and periods of financial uncertainty during their lifetimes, from 9/11 to the 2008 Financial Crisis.

The first step is to close the knowledge gap. Investing can be understandably scary and until you learn what you’re doing, it feels a lot like gambling. In coming weeks, DailyKobo will be writing on “What you need to know about investing in Nigeria”; but for now, you can start by thinking about investing in a Mutual Fund.

A mutual fund is a pool of money, gathered from several individual investors, that is managed on their behalf by “investment advisers”. Stanbic IBTC Asset Management and ARM Securities are two highly rated mutual funds in Nigeria and they both offer a range of investment opportunities.

You can start by going to one of their branches to speak to an investment adviser (for free) in order to get an idea of the kind of investments that match your preference for risk and get advice specific to your financial situation.

Investing early is important because of the power of compounding. Compounding allows you to make money not just on the amount you invest but also on the interest it earns. The earlier you start investing, the longer the magic of compounding can work, growing your investment faster than you imagine.


We change our money mistakes as our relationship with money changes. Spending less money than you earn and investing the difference in your future is the cornerstone for reaching Financial Freedom. It is therefore important to identify the common mistakes we make and address them before they become real life problems.

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