As women, we have SO many disadvantages when it comes to building wealth!
First off, we already earn less, in Kenya, 42% less and we are one of the better countries in Africa. Then, we take time off to have children and that's not taken into account. A man can continue progressing whereas most women will have their career slow down for 2-3 years with each child. If you are a single mum, that's even more pronounced. Second, it's difficult to participate in creating generational wealth because we are completely left out of the inheritance. Finally, we aren't exposed to as many investment opportunities, especially the ones that have the capacity to really grow your wealth - these deals are done in private places and we are left out.
On a more positive note, we are better long-term investors. A big part of it is patience; women are less likely to take a buy/sell approach and instead will hold investments for the long term. At Africa’s Pocket, 70% of the customers are women, which highlights that as a company they are more willing to seek help, and educating oneself is an assured way to gain an advantage when it comes to building wealth.
Below I have highlighted financial mistakes you can avoid and thus improve your chances of financial success:
Mistake 1: Thinking that overnight success is real and that wealth is built quickly.
We idolize the idea of making money super quick, so we don't hear enough about investing for the long term. We are constantly hearing about opportunities that will apparently double, triple your money like tomorrow!
The truth is that most people who build wealth, do it by starting early and staying consistent. It takes time! Financial freedom takes 15-20 years of intentional money management. Those who aren’t intentional can spend 40 years working only to retire poor, in fact, this is the case for 80% of Kenyans.
It doesn’t matter how ‘little’ you have, start where you are! The key thing is to build systems that allow you to stay consistent, not about constantly looking for the next 'big thing'. These are the kind of principles we teach and this is part of the mindset shift driven at Africa's Pocket.
Mistake 2: Investing based on FOMO or other people’s opinions and without goals.
Earlier in my career, I invested based on recommendations from friends and family, without doing proper due diligence and not quite understanding what I'm investing in. I'd see an opportunity, I'd get really excited and just dive in (even if I actually had the skills to do better evaluation). This took a tonne of time - I was always in some investment meetings during the weekends - and I lost money on so many ‘deals’. When I look at the whole picture, I made less than what I’d have made if I just invested in government bonds.
Over the years I've improved on this front because my investments are so closely tied to my goals. I’m clear on how much risk I can afford to take and as a result, my return is more predictable. The journey to my current investment style was quite long and I’ve created frameworks that have guided me and made me a much better investor. Goal setting and making financial plans that work for YOU is core to what is taught and practised at Africa’s Pocket.
Mistake 3: Not building an emergency fund
Emergency funds are essential, this should actually be your first financial goal. Build an emergency fund with at least 3 months of expenses and really work to build it to 1 year of expenses. Every so often life gives you lemons, and it's much nicer to make lemonade using a lemon squeezer than squeezing your lemons by hand. An emergency fund is your lemon squeezer.
Mistake 4: Taking debt to fund your consumption
Don't take debt that doesn't increase your wealth or reduce your expenses. Good debt will allow you to buy an asset that either generates income or appreciates in value. P.S. A car loan is not a good loan if the car doesn’t generate income for you. Bad debt is like a hole in a bucket. It doesn’t matter how much you pour into the bucket, you’ll never be able to fill it if it has a hole, so in order to build your wealth, you have to prioritize getting rid of all bad debt.
Mistake 5: Deferring financial decisions to other people in our lives
Women are particularly prone to making this mistake. We are taught that money is a man’s job, so we let our dad’s, husbands, brothers and bankers take care of our money. Several studies show that the majority of women live longer than their spouses. Additionally, women may earn less, but we make a majority of purchase decisions in the home. So even if you don’t want to, you’ll eventually have to take care of your family’s finances. It’s useful to understand how finances flow in and out of our homes - whether you are married or single. Equip yourself to understand what’s happening and to ask the right questions so you can overcome the challenges I mentioned at the beginning.
Building wealth isn't magic. It's just math, if you spend less than you earn, and consistently invest the difference, it will grow and you will have financial freedom.
This article was written by Guest Writer, Val Njoroge, CEO & Co-Founder of Africa’s Pocket!
Africa’s Pocket is a wealth management platform for Africans to build generational wealth.
A one-stop-shop to learn about, plan for and act on your finances.
Get started on your wealth building journey by downloading this guide: Stop Freestyling your Finances.
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