Make PUNCH part of your everyday experience. Add us to your Preferred Sources Bad money habits that keep people poor

 

Wealth creation goes beyond earning a higher income; it demands disciplined spending, waste reduction, regular savings and prudent financial decisions. Breaking costly habits can help individuals build lasting wealth and achieve financial security, writes JIDE AJIA

Many people dream of becoming wealthy, owning homes, raising successful families, travelling abroad, running profitable businesses and retiring comfortably. Yet, despite working hard and earning regular incomes, they struggle to accumulate meaningful savings or acquire assets that can sustain them in the future.

For some, the problem is an inadequate income. For others, it is the persistent gap between what they earn and how they spend. Money enters their accounts at the beginning of the month, only to disappear before the next payday, leaving them wondering how they managed to exhaust their earnings.

In Nigeria, where the cost of living, transportation, electricity, housing, education and healthcare can consume a substantial portion of household income, managing money has become increasingly important. Nevertheless, even when earnings improve, financial difficulties can persist if spending habits remain unchanged.

Wealth creation requires discipline, patience, planning and a willingness to distinguish between genuine needs and temporary desires. It also demands an understanding that financial security is built gradually through savings, investments, productive assets and responsible borrowing.

As American investor Warren Buffett famously advised, “Do not save what is left after spending, but spend what is left after saving.” The principle is simple: saving should be treated as a priority rather than an afterthought.

For Nigerians seeking financial independence, identifying destructive money habits is an important first step towards building lasting wealth.

Here are seven habits that can undermine that ambition and practical ways to overcome them.

Constantly upgrading gadgets

The desire to own the latest smartphones, laptops, televisions, smartwatches and other electronic devices can become a serious financial burden. Technology companies regularly introduce new models, encouraging consumers to replace functional products with newer versions, even when the improvements offer little practical benefit.

For some Nigerians, owning the latest iPhone or Samsung smartphone has become a status symbol. Others feel pressured to upgrade their devices because their friends, colleagues or business associates have acquired newer models.

While reliable technology is important for work, communication and business, replacing functional gadgets simply to follow trends can divert money from more productive purposes.

Consider someone who replaces a perfectly functional smartphone every year. The money spent on successive upgrades could instead contribute towards an emergency fund, professional training, business equipment or a long-term investment.

The problem becomes worse when the buyer relies on instalment payments, credit facilities or borrowed money to finance purchases. Interest charges and other fees can make an already expensive gadget even more costly.

Financial expert and author Robert Kiyosaki, known for his book Rich Dad Poor Dad, has popularised the importance of understanding the difference between assets and liabilities. His broader lesson is that people should consider how their financial decisions affect their ability to build wealth rather than focusing exclusively on appearances.

The practical lesson is not that consumers should avoid modern technology. Instead, they should replace devices when they are damaged, unreliable or no longer suitable for their needs.

Before making an upgrade, ask whether the existing device can still perform its essential functions. Compare prices, consider refurbished products from reputable sellers where appropriate, and take advantage of genuine discounts when a replacement is necessary.

Most importantly, establish a spending limit and avoid using money reserved for essential expenses, savings or investments to purchase fashionable gadgets.

Seeking others’ approval

Trying to maintain a lifestyle beyond one’s financial capacity is another habit that can prevent wealth creation. The desire to impress friends, colleagues, relatives and social media followers often encourages unnecessary expenditure.

People may purchase expensive clothes, organise elaborate celebrations, acquire luxury vehicles, patronise costly restaurants or take holidays they cannot comfortably afford simply to appear successful.

In Nigeria, social expectations can intensify this pressure. Weddings, funerals, birthdays, housewarmings and other celebrations sometimes become occasions for people to demonstrate their financial standing. While these events have important cultural and social value, excessive spending can leave families struggling long after the celebrations have ended.

Social media adds another dimension to the problem. Users are constantly exposed to photographs of luxurious homes, exotic holidays, designer clothing and expensive cars. What they may not see are the loans, financial assistance, business arrangements or sacrifices behind those appearances.

Consequently, people sometimes spend money they do not have to impress individuals whose financial circumstances they do not fully understand.

Such behaviour can lead to mounting debts, depleted savings and delayed investments. It may also create emotional stress when people feel compelled to sustain a lifestyle that their earnings cannot support.

Nigerian entrepreneur and author Tony Elumelu has consistently promoted entrepreneurship, self-reliance and the importance of creating economic value. These principles offer a useful contrast to the pursuit of appearances: genuine financial progress depends more on productive activities and sound decisions than on displaying expensive possessions.

The solution is to define success according to personal financial goals rather than public approval.

Prepare a realistic budget, establish limits for celebrations and discretionary purchases, and resist the temptation to compete with others. If you want an expensive car or a holiday abroad, make it a planned financial goal rather than an impulsive purchase.

There is nothing wrong with enjoying the rewards of hard work. The danger lies in sacrificing future financial security to maintain an image of prosperity.

True wealth is better measured by financial resilience and the assets one builds than by the lifestyle one displays.

Unnecessary warranties, service

Another habit that can quietly drain household finances is purchasing extended warranties and service plans without considering whether the additional protection is worth the cost.

When buying a television, refrigerator, washing machine, laptop or smartphone, consumers are often offered extra protection beyond the manufacturer’s standard warranty. Sales representatives may emphasise the potential cost of repairs, making customers feel that refusing the additional plan would be financially irresponsible.

Although extended warranties can be useful in certain circumstances, they are not automatically worthwhile. Their value depends on the product, the price of the plan, the manufacturer’s existing coverage, the exclusions and the likelihood of needing a covered repair.

For instance, someone purchasing a household appliance may spend additional money on protection that duplicates the manufacturer’s warranty.

If the appliance remains functional throughout the extended coverage period, the extra payment may produce no financial benefit.

In other cases, the warranty may exclude common faults, impose complicated claims procedures or require the customer to pay for repairs initially.

Nigerian consumers should therefore examine the terms of service plans before committing their money. They should ask what is covered, how long the protection lasts, whether accidental damage is included and whether the cost of likely repairs justifies the premium.

This does not mean that all warranties are wasteful. For expensive equipment, particularly where an unexpected repair could disrupt a household or business, additional coverage may offer valuable protection.

The important distinction is between buying protection after assessing the risks and purchasing it because a salesperson has created anxiety about possible future expenses.

A sensible alternative is to maintain an emergency fund for unexpected repairs. Such a fund can provide flexibility when dealing with different financial emergencies, although it does not replace insurance where a major loss would be unaffordable.

For entrepreneurs and small-business owners, the same principle applies to subscriptions, maintenance contracts and software packages. Every recurring payment should serve a clearly identified purpose.

Review such expenses periodically, cancel services that are no longer useful and avoid paying for overlapping benefits.

The objective is not to eliminate every additional expense but to ensure that every naira spent provides reasonable value.

Avoidable payment penalties

Late payment charges may appear insignificant individually, but their cumulative effect can undermine a person’s financial stability.

Depending on the contract, missed deadlines can result in penalties, additional interest, reconnection charges and other expenses. Repeated delays may also affect access to credit or damage a borrower’s relationship with a lender.

For Nigerians managing rent, school fees, electricity bills, internet subscriptions, insurance premiums, loan repayments and other commitments, poor payment planning can make an already difficult financial situation worse.

Consider a person who regularly misses payment deadlines because of forgetfulness or inadequate organisation. Even when the person earns enough to meet the obligations, avoidable penalties can consume money that could have been saved or invested.