Spending mistakes that fail people in making ends meet

People with poor spending habits often disregard their financial abilities. They choose to dress very expensively, patronise exclusive places such as saloons and restaurants; and take their children to very luxurious schools. Always their slogan is: ‘Spending money is not my problem; the problem is getting enough money to spend.’ Inset is usually the costly type of food they want to eat. FILE PHOTO

What you need to know:

  • For the salaried employee, if you want to make ends meet, guard against the spending mistakes that burn out your money before pay cheque, James Abola highlights the mistakes.

The phrase, “Failing to make ends meet” is common in Uganda and it means that a person has got into a pattern where their income does not cover the money they spend month after month.
In our book, Make Sense of Your Money, we describe this situation as having more months at the end of the money - meaning the salary gets finished several days before the next pay cheque.
There are various reasons why people fail to make ends meet. Some people are that way because of misfortune while others experience it as a result of spending mistakes.
Recently a group of people attending a personal money management course I was facilitating shared with me their major spending mistakes.

Living above means
A woman said that she used to struggle to live within her means until she met a colleague who advised her to live above her means instead. Foolish as the advice might seem to you, the woman took it seriously and immediately adjusted her expenses to an amount that was twice her income.
Since then she started to live an enviable lifestyle in the eyes of observers. She dressed well and patronised expensive saloons and restuarants. For a long time her slogan was: “Spending money is not my problem; the problem is getting enough money to spend.”
The good life had to be funded and the principal sources of funds were money lenders. At times she would not have enough money to repay the lender and the loan together with the outstanding interest would be rolled over for another month.
At the time of the course, the woman estimated that if she cut all her expenses to zero and used all her income to pay her outstanding debts it would take a minimum of 12 months.

Relying on anticipated income
Another participant said his biggest spending mistake arose out of spending money in anticipation of future income.
The man had supplied goods to some people who had given a firm promise to pay him within three weeks. He banked on the promised payment and spent the money he had in his pocket and even bought some goods on credit.
But when the three weeks elapsed, the debtors started playing hide and seek. Due to the emotional pain that he experienced during that period the man has sworn never to rely on anticipated income to pay for his expenses.

Bonus lifestyle
One participant said his expenditure got off the rails when he adjusted his ongoing expenses basing on money that had come as a windfall. After the windfall money got finished, the expenses such as the monthly TV subscription and termly school fees remained and were too high for his normal income to cover.
Even though he knew that the bonus was a one off, the man found it difficult to adjust his expenses downwards.

What will people say syndrome
Several participants said that their spending mistake was that they spent money out of fear of the opinion of other people and they cited several examples to illustrate the issue. The most common had to do with money spent to help relatives and friends.
One woman said she used to experience strain because of the huge amount of money that she gave to people.
One time a friend called the woman to ask for some money but because of what she had been discussing with the coach she hesitated to respond. The aid seeker offered to go and try another person.
That experience was an eye opener, she realised that she was not the only person capable of solving the financial problems of her relatives and friends.
Another man said that for a long time he was giving either Shs50,000 or Shs100,000 for wedding meetings because anything less made him think that people might call him a stingy person.
Unfortunately for the man, he was receiving several requests for wedding contributions, with some months about 30 per cent of his salary going to weddings.

‘Just in case money’
Many people have the habit of carrying just in case money - the money that a person carries to take care of any emergency that might arise during the day during the week.
For example, a person who has a shopping list totalling to Shs70,000 will instead withdraw Shs100,000 at the ATM, the extra is the ‘just in case money’.
What usually happens is that the emergency does not occur but the money will get spent anyway.
I am interested to know if any of the above mistakes apply to you or if you have other mistakes.

James Abola is a business and financial literacy author, coach, consultant, speaker and trainer. Email: [email protected]