It’s good to have money in your pocket and your bank account. Often, you want to spend, invest and help as many people as you can. But a bad decision can have big consequences!  We’ve identified five money mistakes you should never make.

1. Paying someone else’s expenses before you’ve paid your own
Always pay your own expenses first and then help out family and friends if you are able. Make this a top money priority.

We know it can get tough out there and when you are earning, friends and family will often turn to you for assistance. You want to help and can feel a lot of pressure to give them money, particularly if they have supported you in the past. But if you get yourself into debt you may become a burden on them some time in the future. So help out if you can – but only after you’ve paid your own expenses.

2. Standing surety for a loan
Standing surety means you guarantee that if a person takes a loan they will repay it, and if they don’t, you will repay the loan on their behalf. Standing surety for a loan is a big risk.

To work out if you can afford to stand surety ask yourself what would happen if the loan became due and you had to pay it. Would you have the funds available and be able to pay without any financial hardship to you and your family? If the answer is no, don’t stand surety – or find another person who can share the surety with you.

3. Ignoring debt
The bills come in and pile up – either in your inbox, SMS folder or at the front door. If you don’t open the bill you won’t see the bad news or how much you owe. This may make you feel better in the short term but it will harm you in the long term, and could affect your credit record.

Debt collectors are very persistent – they want their money and they won’t stop bothering you simply because you haven’t opened your accounts. But companies can be more reasonable than you think and many are willing to agree to a payment plan for outstanding debt. The sooner you deal with an unpaid debt and make an arrangement, the more open they will be to agreeing to a solution. The longer you ignore debt the harder it may be to settle amicably within your means.

4. Investing in a pyramid scheme
Pyramid schemes are dangerous and far too many South Africans have lost money investing in them. A pyramid scheme is a person or company which promises high returns (such as your money will double in two months), but the high returns come from other people investing after you. So in effect your investment pays the person who invested before you, and to earn your return you need an investor who invests after you. Eventually the scheme collapses because there are no more investors, and the money you invested is lost.

It is not always easy to know whether an investment scheme is legitimate. Identify pyramid schemes by asking who is behind the investment, and then check that they are registered with the Financial Sector Conduct Authority (FSCA). Be extra cautious and double check anyone who is offering a high return – more than 10% per year is always suspicious. If you have a question, ask your bank or HR department at work for advice or contact the FSCA or newspapers and online financial publications. Don’t ever feel pressured to invest immediately – ask questions first.

5. Not having an emergency fund
There is nothing more stressful than an expensive emergency you cannot pay for. Whether it’s an unexpected home or car repair or an unexpected medical expense, you need to have an emergency fund to cover these costs. An emergency savings fund can also help prevent you going into debt or having to ask for a loan, when you need money for an emergency.

Experts say you should have around three months’ salary in your emergency fund, but this is quite a large amount so start saving small amounts and build up your fund. Every bit saved helps, so don’t worry if you take a while to reach your final figure. But do start! And remember that an emergency fund is for emergency expenses, so don’t dip into it for general expenses.

A final word
It’s your money – spend it well, spend it wisely and avoid these money mistakes. In the end everyone will benefit from your good money management.