Almost everyone wants money and we often need more of it for whatever reason. Most people think that money is great and powerful which is why they spend a lot of time thinking about it and the way they want it to grow and multiply so that they can have more and more.
The first step towards achieving financial success is by having a paradigm shift in your attitude towards money. Some of us have interacted very badly with money. We fail to achieve our financial goals because of certain fundamentals that we have largely ignored, and that is why we continue to punch below our economic weight.
Most people inherit their behavior and attitudes towards money from influential people in their lives, notably their parents. And so the money habits we possess are a reflection of what we saw as we grew up. In school we are never taught how to handle our finances, how to save and invest wisely and there is no class on financial literacy that we attend. Question is what is your psychology of money? The psychology of money is how someone’s beliefs, expectations and feelings influence their financial success and life abundance. Do you have a scarcity mentality or abundance mentality?
Take charge of your money.
The simplest way to do this is by working with a budget. A budget is simply a spending plan. It helps you keep track of your finances. You might consider having a small notebook to record all your daily expenses. Make sure to record every shilling you spend and keep a record of your purchases. Having tracked your expenses means you have a good sense of where your money is going. What are your priorities? Are you mindlessly spending huge chunks of money on things that you really don’t need. Don’t go shopping without a shopping list. Avoid impulse buying. If it’s not on your shopping list in the first place then you do not really need it. Try and be faithful to your budget, therefore create a budget which puts emphasis on what you need.
Cut costs, reduce debt.
For those already in financial doldrums and being washed away by debts, putting your life back on track will probably be the biggest struggle of your life. Reduce your debt and spend less than you earn and get to know and study your spending habits. Cut costs and allocate a portion of those savings into paying off your debts. Kick your addictions. You know your poison. Start by cutting back gradually until you get to the point where you can do without it and save that money. For those who do not have any debts think twice before you guarantee someone that loan. Careful financial planning can help prevent money problems.
Save and supplement your income.
Take care of your future by saving. Saving is about preparing to spend in the future and being able to live comfortably throughout your whole life. Find ways and means of supplementing your income. Some students have small businesses that earn them some money when they are not in class. This is admirable In that they are setting up base for their financial well being in the present time. However they need to put in place structures and systems that will ensure the business can run with little input from them and that they are sustainable in the long run. To do all this, one might require some assistance from a consultant.
Having established a surplus you need to have financial goals. An example of a financial goal is buying a house, saving for your retirement, furthering your studies even buying a car. Prioritize your goals and allocate realistic time frames for achieving each goal. Setting a goal is important because it sets direction by establishing targets which provides an individual with a structured approach to achieve the goal.
Overall, your choice of investment will be informed mostly by the time you have in your hands as well as being guided by existing and new goals that you want to achieve in the short, medium and long term. There are two types of investments; active and passive. Active investments need your daily participation and require a lot of time and commitment. Passive on the other hand require little, if any daily involvement. Active investments include owning livestock, running an enterprise, and agribusiness. Passive investments include owning financial assets like treasury and corporate bonds, treasury bills, investing in the money market funds and unit trusts. The returns on these investments are generally very stable and safe.
Finally establish your current financial position. The best way to do this is by using a net worth statement. This is a summary of your assets and liabilities. Your assets should always be more than your liabilities. When this is not the case try to cut down your debt. To benefit from the capacity to dictate the direction where your finances go, you need a properly structured financial education session. The five critical areas you need to be well conversant with are; money and income, money management, saving and investing, debt and your spending habits, as well as risk management. This is the only way to get financially stable and achieve financial success.