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4 Financial Mistakes Every New Graduate Must Avoid

Over 50,000 students graduate yearly from Kenyan Universities (not mentioning the college graduates!). In his financial book ‘Rich Dad poor Dad’, Robert Kiyosaki elaborates clearly that our schools don’t prepare students on financial literacy. The structured and secure academia programs render ‘false’ comfort (ie not found in real life). Upon stepping into the real world, this youth start facing new real challenges – finances topping, often. The decisions made at this stage can easily determine the graduate’s entire financial status. This article will help you avoid taking the wrong turn which most do.

Mistake #1: Having no Saving Plan

With unemployment figures scoring high, most of the graduates will grab any job that comes their way regardless of their career. This indicates that just a few will find sustaining employment. The sad story is how they spend their hard earned money; regular expenses swallow their whole paycheck. And there is a ‘reasonable’ excuse not to save: I have no enough money.

It’s important to understand that money saving is a habit, and all habits are learnt, whether positive or negative. Have a plan. Rent a house that corresponds to your earning, avoid luxury spending like purchasing unreasonably big TV, and instead of getting yourself a cool car now, invest that money somewhere. This way, you’ll have a good portion of your salary left to save. Look into the future, take a step at a time. One day you’ll truly appreciate the baby steps you’re making now.

Mistake #2: Valuing the Money In Your Wallet

Money in your pocket has no specific value. 500 shillings can be more valuable than 1000 shillings. How? If I took the 1000/- and bought some pizza, and purchase a book with the 500/-, no need to explain which of the two ‘monies’ is more valuable.  The big lesson is, money gets its real value when it has left our wallets. This is a simple fact yet of matchless importance when applied.  

Understanding this truth will help you in two ways. First, you’ll avoid keeping unbudgeted money in your pockets – since money has a way of finding genuine (but unnecessary) expenses. Second, you’ll spend in order of priority and reason. For instance, the same money you can spend buying a car, can buy a plot that in the near future can help you buy the car comfortably.


Mistake #3: Underestimating the Debt’s damaging Power

Committing mistake #1 and 2 above is likely to earn you a new name – debtor. That is not beautiful. Almost every individual has a debt; we only differ in the kind of debt we have, our understanding of the same and debt clearing techniques. There are only three rules to conquering debt power:
  
  i)   List your current debts and make a precise plan to clear.
  ii)  Avoid bad debts. These are debts used to purchase liabilities and depreciating assets.
  iii) Learn to take advantage of good debts – get other people’s money working for you.

Start getting disciplined now, don’t wait till the debt heat is hot enough to be felt; it might be a bit late. Take manageable good debts, acquire appreciating assets, and see your financial graph grow up.

 

Mistake #4: Unclear Wealth Creation Plan

I found a profound statement in Napoleon Hill’s book Think and Grow Rich, “Every human who reaches the age of understanding money wishes for it. Wishing will not bring riches.” In fact, Hill stresses that for one to succeed in anything, he must be organized into a definite plan of action, and directed to a definite end’. In other words, to achieve big financial dreams, you need a definite plan, often called wealth creation plan.

It’s witnessed, most people change their careers after few years of faithful serving. This often happens because they realize they ain’t going to achieve their dream lives. I’m in that transition – and I know we’re many. You can reduce the chances of going that direction.


Take some time and seriously think of what you want to do in life. Examine yourself. What life could you love to live? How much money do you need to achieve your dream? How can you generate that amount? Deep thinking helps a lot because it helps you create a strong desire and thus a plan. Yes, grab that job that comes your way, but don’t shout hallelujah and relax! Employment, especially the kind we have around, won’t make you rich. Think outside the box – create a wealth creation plan.

Conclusion

It’s truly sad watching the huge unprepared numbers of graduates diving into world realities only to be burned out. We come to a realization a bit late, contrary to what education system taught us, life calls us to face challenges and not avoid them. One of such challenges is putting your financial records strait. You have a choice to make – accept to get into a rat race or make a plan to build a health financial life.

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