The rise of digital platforms and social media has introduced both avenues for financial education and pitfalls of comparison. While some peers showcase entrepreneurial successes and lavish lifestyles online, it’s essential to discern reality from curated portrayals.
As Katrin Kaurov, CEO of the social financial platform Frich, observes, “You see a 17-year-old TikTok who is like, this is how I built a seven-figure business overnight… It creates very unrealistic portrayals of how people are managing money” .
To provide actionable insights, we’ve consulted Ghanaian financial experts and young entrepreneurs to highlight five common money mistakes to avoid in your 20s. By steering clear of these pitfalls, you can pave the way for a secure and prosperous financial future.
ALSO READ: 5 risky business ideas you should never invest in
Former Germany striker Gerald Asamoah has cast doubt on Africa’s chances of winning a FIFA World Cup, citing team unity as a key issue. He shares details…
1. Living Beyond Your Means
The allure of a lavish lifestyle can be tempting, especially when influenced by social media portrayals. However, spending more than you earn can lead to mounting debts and financial stress.
“It’s easy to get caught up in the ‘soft life’ trend, but without proper budgeting, you might find yourself in financial turmoil,” says Patrick TV, a renowned Ghanaian financial planner.
Adopting a realistic budget and distinguishing between needs and wants can help maintain financial stability.
2. Neglecting an Emergency Fund
Unexpected expenses, such as medical emergencies or job losses, can occur at any time. Without an emergency fund, you may resort to high-interest loans or credit cards.
“Aim to save at least three to six months’ worth of living expenses in an accessible account”
Building this safety net provides peace of mind and financial security during unforeseen circumstances.
ALSO READ: 6 money habits that quietly make you less attractive to potential partners
3. Borrowing Money for Lifestyle Upgrades
In Ghana, it’s not uncommon for individuals to take out loans or use credit for non-essential expenses, such as purchasing the latest smartphones, hosting extravagant events, or going on luxury holidays. However, for business owners, this approach can be particularly detrimental. Financial experts caution against using borrowed funds for lifestyle upgrades. Instead, loans should be utilised to invest in business growth, such as expanding operations, purchasing equipment, or enhancing product offerings.
“Loans should be used to build wealth, not to fund temporary pleasures”
By prioritising investments that directly contribute to the growth and sustainability of your business, you can ensure that borrowed funds are used effectively, leading to long-term financial stability. Additionally, it’s essential to maintain a clear distinction between personal and business finances. Mixing the two can lead to financial mismanagement and complicate tax reporting. Implementing sound financial practices, such as creating detailed budgets and regularly reviewing financial statements, can help in making informed decisions and avoiding unnecessary debt.
4. Delaying Investments
Many young adults postpone investing, thinking it’s only for the wealthy or older individuals. However, starting early allows your investments to grow over time through compound interest.
Even small, consistent investments can yield significant returns in the long run.
Consider exploring investment options suitable for your risk tolerance and financial goals. Investment options include, shares, mutual funds, treasury bills, real estate, short-term rentals, e-commerce, mobile money services, agribusiness, poultry farming, vegetable cultivation, cashew farming, renewable energy, solar installations, fintech startups, digital marketing, content creation, waste management, recycling, transport services, delivery services, tourism, eco-tourism, hospitality, online education platforms, vocational training, agro-processing, and manufacturing. These sectors align with Ghana’s current economic trends and offer promising returns for young investors.
ALSO READ: Top 10 African countries with the most expensive restaurants – see where Ghana ranks
5. Ignoring Financial Planning
Without clear financial goals and a plan to achieve them, it’s easy to lose track of your finances. Regularly reviewing your income, expenses, and savings can help you stay on course.
“Set aside time each week to assess your financial situation and adjust your budget as needed,” experts advice
This proactive approach ensures you’re making informed decisions and progressing towards your financial objectives.
Avoiding these common financial mistakes can set the foundation for a secure and prosperous future. By living within your means, preparing for emergencies, managing credit wisely, investing early, and planning diligently, you can navigate your 20s with confidence and financial stability.
