- Find out what is money to you
- Guidelines to being financially healthy
- 7 steps to being financially free
Black Friday (hooray) is here and we are all super excited, right?
Some amazing offers online especially now with the lockdown and festive season coming what else could we ask for.
Money is power: so said one.
Money is a cushion: so said another.
Money is the root of evil: so said still another.
Money means freedom: so runs old saying.
And money is all of these- and more.
Money pays for whatever you want- if you have the money.
Money buys everything except love, personality, freedom. Immortality, silence, peace.
– Carl Sandburg
✅ Do you know the difference between money and wealth?
✅ Have you defined the role of money in your life?
✅ Do you feel financially secure?
I really hope this doesn’t come as a surprise but money and wealth are not entirely the same thing.
Your relationship with money defines how content you are in life.
If you are like most of people, then you probably also in the group that is fighting for different sameness. In this group it is all about working to earn money.
The irony of it all is that we have the same number of hours as Beyonce but yet what she earns in her 24 hours is totally different from what most of us do.
Today let us learn about Money, Wealth and Us.
Understanding money, wealth and our relationship with it can be a little complicated as it special like our fingerprints. How we react and handle money is more psychological than anything else, ut the good news is that even a negative relationship can be flipped.
My hope is that you have discovered by now that money and happiness are not correlated. Research has shown as time and time again that money doesn’t necessarily account for ones happiness. A research that was done with lottery winners documents that they reported profound unhappiness if that doesn’t speak volumes I really don’t know what does.
So, anyway, is money bad?
To answer that, reflect on these questions;
- Have you defined the role of money in your own life?
- Is your money for acquiring basic needs and essential items in your life?
- Or is it for pleasurable desires? Or is it for status? Ego?
Comparing yourself to others…
The most definite way to make yourself unhappy is by comparing yourselves to your peers.
In this world of gadgets and fast internet it is almost impossible not to wonder how ‘the other half lives,’ but this is deterimental to our financial wellbeing.
Once you nail contentment, then you know to trust your journey and believe in our own true desires.
( By the way, have you ever thought of how funny it is that your peers are also probably comparing themselves to you?)
This Black Friday will have a lot of us spending money we don’t have for things we don’t need and for people we don’t like.
Stick to the plan and have financial ground rules, here are some tips and steps to take.
Guidelines to being financially healthy;
Be honest with yourself:
Lie to everyone if you have to but never to yourself. You are the only one who is really accountable for your actions and the one who has to face the consequences.
Get out of the denial, it will get you stuck.
If you have a problem accept and you will be on your way to recovery.
Work out your budget:
The more we earn the more we adjust to our new expensive lifestyle. Sometimes without even realising it, we find ways to justify our spendings. You must have heard people say, “Money is never enough”
What we actually need to do is have a budget and live by it. Religiously save for emergencies, which other hand should have been catered for. Once you know what money means to you and are honest with yourself then this becomes very easy.
To simplify the math your outgoings should not exceed your incomings. Spend less than you earn with a budget.
Martin Lewis of money saving expert has a mantra…
If you are not skint…
Is it worth it?
Have you checked the prices elsewhere?
If the answer is no… DON’T BUY IT!
If you are skint…
Do I need it?
Can I afford it?
Have I checked the prices elsewhere?
If the answer is no, DON’T BUY IT!
Pay yourself first.
(A very tricky one if we are being honest here)
This is what sets the rich from the poor apart.
Do aim to save 10% of your income by paying yourself first. Trust me, it takes a lot of practice to remember that you come before your creditors and bills. Like everything else , practice makes perfect.
Once you nail it then you are on your way to financial freedom.
What are the steps to financial freedom and financial independence?
You are financially free and independent when you have consistent passive incomings than outgoings, simple and clear.
7 Steps to Financial Freedom
1. Set up automatic savings.
You need to make the switch from being a spender to a saver.
Do this by setting up automatic savings from your pay before it gets to your pocket.
Adjusting spending when you see that you don’t have any money left in your account will not cut to the chase.
It just never works. Saving what’s left over at the end of the month is game of cat and mouse.
Just pay yourself first, pay your creditors/bills after and now you can Black Friday the leftover.
Coined by Dave Ramsey, this method lists all your debts from smallest balance to biggest balance. Then pay them off from smallest in that order. The idea has a psychological benefit making it achievable for many.
There is also Debt Avalanche Method is for those who want to get out of debt faster.
With this, first pay off the debts with highest interest rate, get that out of the way, then to your lowest interest rate.
Of course you shouldn’t forget that you’ll have to make the minimum payment on all your other debts, but apply any extra money to the debt that is costing you the most.
Negotiate, as often as you can, with the credit card company for the lowest possible rate and consider getting a debt consolidation loan to reduce your interest rate.
3. Boost your emergency fund.
If there is anything 2020 has taught us is that we need to have an emergency fund in place.
(Have we learnt anything in these unprecedented times?)
Anyway, to be clear emergency fund’s goal is to help you reach financial freedom by having three (preferably six months) of living expenses in a savings.
Just a perfect cushion for those unexpected shocks such as losing your job (read COVID-19) or having an illness or injury.
You want to make sure you can cover your rent/mortgage and basic living expenses until your insurance takes over.
In the special case of having dependents or a family to look after, are self-employed etc you might want to increase that emergency fund to one to two years of living expenses.
4. Increase your savings.
Now that your high interest rate debts paid off (mortgage not considered as debt in this case) you can afford to level up your retirement savings.
Redirect all debt payoff monies towards your financial freedom and retirement pot.
There several books on savings.
A book a found so useful was “ The secret language of money” by David Kruger
I like the whole psychology behind our relationship with money hence our behaviour around it.
David says we say money talks but what does it say? It says whatever you tell it to.
5. Use compounding interest to your advantage.
Talane Maedaner says her blog, “A key fact to keep in mind: at a 7% rate of return (the average rate of return you are likely to get in a 60/40 stock/bond balanced fund over time), your money will double about every 10 years, even if you don’t add any extra money – the incredible power of compound interest! Obviously, you want to maximize the number of doublings and the easiest way to do that is to get a decent chunk (think $50K to $100K) invested as soon as possible – before you turn 30 ideally”
6. Increase your income.
Have you noticed how quickly we have all moved the virtual world?
Start an online sideline gig or hobby, make it futuristic and robust.
Invest in trainings or skills a lot now are available online for free.
And the last step…
7. Pay off the mortgage and save for education.
Once all high interest rates debts are done all is left is for the mortgage to be paid of and the children’s future educations savings.
Remember, knowledge is power, invest in yourself. The books below wi transform your life give it a shot.
References and recommendations;
Black Friday 25% off click to get the offers.
Dave Ramsey America’s trusted voice on money.
Photo by Pexel.com
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