3 Kinds of Extreme Relationships People Have with Money.
Over-saver? Over-spender? Or Over-investor? Which one are you?
Have you ever heard the saying, “Too much of everything is bad?” Well, there is a high degree of truth to it. Financially, some people are extreme — the over-savers, over-spenders, and over-investors.
1. The Over-saver
Pros:
- Financial Security: Over-savers always have liquid cash available, which is a huge advantage in case of emergencies.
- Discipline: Their saving discipline means they are less likely to waste money on unnecessary purchases.
- Low Debt: They avoid accumulating debt by only spending what they need.
Cons:
- Losing Value: By keeping too much money in liquid cash or low-interest accounts, they risk their cash losing value over time due to inflation.
- Missed Opportunities: Over-savers often miss out on the potential for higher returns from investments, which could significantly grow their wealth.
- Bank Fees: They may incur incessant bank charges, reducing the overall value of their savings.
Instead, do this:
- Diversify your savings into high-yield accounts or low-risk investments. Explore options like Optimus by Afrinvest, Moniepoint, or Cowrywise to earn interest and offset bank charges.
2. The Over-spender
Pros:
- Economic Contribution: Their spending habits can boost the economy by increasing demand for goods and services.
Aside this, there is no benefit to over spending.
Cons:
- Lack of Savings: Over-spenders often struggle to save, leaving them vulnerable to financial emergencies.
- Debt Accumulation: Without a budget, they may overspend on non-essential items, leading to debt.
- Regret: They may realize too late that they’ve exhausted their funds on unnecessary expenses, missing out on important needs.
Instead, do this:
- Create a budget that prioritizes essential expenses and savings. This will help you manage your spending while still enjoying your hard-earned money.
3. The Over-investor
Pros:
- Potential for High Returns: Over-investors often see significant growth in their wealth through smart investments.
- Inflation Protection: By investing in assets like stocks or real estate, they protect their money from losing value due to inflation.
Cons:
- Liquidity Issues: Investments are not always easy to liquidate, which can be a problem if cash is needed urgently.
- Risk Exposure: Putting too much money into high-risk investments can lead to significant losses if the market turns.
- Over-diversification: While diversification is important, spreading funds too thin across too many assets can dilute returns.
Instead, do this:
- Spread your investments across different asset classes, such as stocks, bonds, ETFs, and REITs.
For example, if you have ₦1,000,000 to invest, consider allocating ₦100,000 to bonds, ₦200,000 to a high-yield savings account, ₦200,000 to stocks, ₦300,000 to ETFs, and ₦200,000 to REITs. This way, you reduce the risk of a significant loss. This protects you in case the stock market crashes; instead of losing ₦1,000,000 you would have lost only ₦200,000.
Note: This is not an investment advice, only an example for educational purposes
Understanding your financial personality is the first step towards achieving a balanced and prosperous financial future. By recognizing the pros and cons of your habits, you can make informed decisions that protect and grow your wealth.
Since you enjoyed reading this, you will love this:
Wisdom is a shelter as money is a shelter, but the advantage of knowledge is this: Wisdom preserves those who have it.
Ecclesiastes 7:12
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