ABCD of Money Management
We all want to get rich (Well, most of us). Ask any average person and most people are aspiring to the same old thing. Becoming financially independent. But what exactly are we doing with our current finances to help us get there? It’s not going to happen by magic, we actively have to plan to get there.
A: Always track the Money
Do you know how much you have in your bank account today? Do you know how much you owe?
Do you know how much your bills are? If the answer is no, then how do you plan on becoming financially independent if you do not know where you are financially today and how much you will need to officially say “I am now financially independent”. Think about it. It might sound like a chore, but find the best way for you to track your finances. For the non?spreadsheet fans, there are many apps out there today that will help you track the money.
B: Budget! Budget!! Budget!!!
Some people hear this word and run a mile. But it need not be complicated. I earn X, I then spend X on A, B and C and I have Z left. Without planning on how you wish to spend your cash, you will never be able to know how far that cash can go and how it can help you achieve your plans.
Money is a tool. If you do not use it well, you will waste it. A simple pen and paper will help you know that out of 4,000 I have been paid, 3,000 covers all my bills so it means I can save 1,000 every single month and at the end of the year I should have 12,000 in my account. Simply put, if you fail to plan, then you have successfully planned to fail. If you do not give your money a name, it will take on the name of whatever situation you happen to find yourself in.
The ultimate passport in the western world! Your credit score is something you must protect. The fastest way to creating wealth is by using other people’s time and most especially other people’s
Money. If you do not take care of your credit, you have lost access to the fastest way of raising finance for projects that will facilitate your journey to financial independence. Pay your bills on time, set up direct debits for the minimum payment if you may not remember. This way you don’t fall foul of missing payment dates. Be strategic about owning and using credit cards. Remember, money is a tool and your credit is also a tool. A tool you can choose to do good or bad with.
Simply put, if you do not find a way to manage your debt, especially bad debt (Bad debts are those that drain your wealth, and offer no real prospect of ‘paying for themselves’ in the future) it will control your future and your finances. To help control and pay off your bad debt (Those bags you did not need, or the luxury holiday you could not afford), you must 1st of all know exactly how much you know and to whom you owe it to. Build the repayment of the debt into your budget to know how much you can safely afford to pay off each month.
Article written by: Folake Abiola – James BA Hons. ACCA, DipPFS, Financial Controller – September 2017