When it comes to personal finance and achieving its success, you need to appreciate the fact that it is not a single step journey. But what remains the same year in year out and millionaires and billionaires is the basics of personal finances.
How can you be able to get ahead of your finances and know what is the best way to achieve the success that comes with managi9ng personal finances?
Create A Budget
You cannot know where your money is going until you sit down and create a budget. We have talked about financial goals but what is the point of those goals if you do not know where your money is going?
A budget is mandatory for anyone making a few hundred of thousands of shillings a month or even a few millions every month.
Start Contributing to Your Retirement Plan
Do not wait until you in your late 30s to start contributing towards your retirement. If your employer does not have a retirement plan where you can contribute and match the same, start your own.
Majority of the insurance companies offer some retirement plans that you can contribute from as little as 500 Shillings a month and the minimum age requirement is 18 Years, Meaning that if you in college, you can start contributing towards your retirement.
Pay Yourself First
I have talked about this before. The biggest gift you can ever give yourself is by paying yourself first right before giving that money to your landlord and other monthly bills. Take the resolve to set aside a minimum of 5% to 10% of your after-tax salary to savings only. If possible, have this deducted automatically from your salary account or current account. This is the best principle I have ever learned from the book, The Richest Man in Babylon.
Check Your Insurance Coverage
This is perhaps one of the most controversial discussions we current have in Kenya. I, personally being an insurance agent I know the questions that people raise, like, is this an investment or a savings plan? Is this even logical to put in such amount of money to only get out this much? Or what is the point of getting the insurance plan when I can pay for a piece of land for the same value?
Either way, one thing we shall all agree is that insurance gives you the fallback plan and the protection that comes with unexpected emergencies be it health or even dental plans. What you need to ensure is that you do not buy too much or too little of insurance plans when you have or do not have dependents or even getting extra car loans.
Price Vs Value
Warren Buffet once said, “Price is what you pay; value is what you get.” When it comes to investment, you need to know that price and value at no point to do they mean the same. Generally, buy a stock that you believe the share price is less than the business’s intrinsic value not just because the price is lower.
Say the stock market value goes lower than 5% as compared to yesterday and consequently the shares you bought yesterday. This does not mean that the business is worth 5% less it was yesterday.
Risk Arises From Lack of Knowledge
It goes without saying, knowledge is power and one of the best investment you can make is in yourself and the knowledge that you possess. A character that most billionaire business people and investors are that they do decide some hours of their day learning something new and educating themselves on a particular topic. The more knowledgeable you are on a particular topic, the better investment decisions you will make in that particular field.
Invest
One of the reasons you are saving is because you can be able to invest in the area you have been gaining more knowledge on and also because you cannot have millions lying in your bank account simply for a rainy day.If you can contribute towards a savings account and a retirement plan, trust me, you can invest. Start small. The goal is to start, it's not a matter of being flamboyant.
Believe In Your Passion
It should not matter how much you have in your account this is because believing in yourself and your goals do not cost anything. Oprah Winfrey could not have put it any better, “ You become what you believe, Your life is based on everything you have ever believed.”
The goal is to find something that you believe in and that you love doing. Something you cannot wait to wake up the following day in the morning and start doing. Invest, learn about your love doing and go after it. The sooner you learn what you like, the better. Get paid to do what you love. This way you will realize greater job satisfaction and realize growth.
You do not have to everything that is mentioned here but resolve to do at least 60% of what is stated and you will realize some major improvement in your finances and financial goals. Take one area, focus and set milestones towards achieving and with no time, you will realize major improvement in your life.
so, i've created and a budget and i get a deficit like a big gap, which is easier between cutting down expenses(some of which are neccessities) or make more money? and how?
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One, even when the deficit is big, do not be scared. You can consider doing the cost cutting. The necessary expenses that need a cut down then yes, go ahead and cut them down. Making more money and not controlling your expenses will just lead to bloating your expense more and you will not have achieved anything. After managing your costs, then you can consider making more money. How to make more money? Consider an option that you comfortable with , be it a side business, getting a part time job, freelancing just to mention a few.
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