In the last post, we started off by discussing the need to learn continually as one of the major areas required to qualify as a modern citizen of the world.
Today, I will be touching on the second area which is Earning( Finance).
Before, talks about money were centered around earning,spending and saving. I recall one of the first advise I got as I went on my national youth service ( a compulsory 1-year service to the nation after college, it starts with a 3-week paramilitary training), we were told to save the stipends given to us for the raining day.
Same thing applied when I started working for the first time and earning salary.
But in the modern age, the focus is now more about understanding your psychology around money. The question now is about How you handle money?.
Yes there is still the spending and saving part, but now there is more knowledge about how to handle our financial affairs.
In the first world countries( UK,US & Europe), your credit ratings are important, you are encouraged to get loans, buy stuff on credit and then pay back in installments. A lot of people are under the burden of student loans, car loans, mortgages, etc, but in developing countries, the opposite is the case, you are a super star if you don’t have any debt to a bank or any financial institution. But we are gradually moving up the ladder & becoming “modern“.
I remember buying my first car, laptop & home electronics about 13 years ago via a leased plan with a financial institution. They evaluated my current monthly pay & age to decide on what amount they could loan me to buy the stuff and then I gave post-dated monthly cheques.
It was really easy and convenient as I got the car & gadgets early to use while I paid back gradually.
I am an advocate of being financially educated and intelligent to guard against being broke and the inability to attend to my financial duties.
There are principles that I have gleaned from books and mentors over the last 20 years that I would like to share.
Here are 2 :
1. Be accountable: I find it very surprising when I talk to working class adults about their finances and most only have the faintest idea about how they spent their monthly salary. Accountability is a modern age trait, how do you make changes if you don’t even know what happening?
I have kept a monthly record of my cash flow since my teenage years.
Even before I had a computer and used Excel, I had a little book that I wrote details of my income(Inflow) and my spending ( Outflow).
Because of my unique situation supporting my mother, I had to be very smart with money to ensure both ends meet on a monthly basis. Now as a married father of 2 kids, I still do this with my wife.
2. Draw up a plan ( Budget): As part of being accountable for your finances, draw up a monthly budget of how you intend to spend money & stick to it as much as possible. It takes discipline to do this, but it gets easy with time.
My wife & I have a typical monthly budget consisting of allocations for:
- Tithe: As a Christians, my wife & I have an obligation to worship God with a 10% of our income. Our income is a direct representation of our lives (time, effort & labor) & to appreciate God and thank him for the privilege, we worship him with this designated portion & believe with that seed, we grant God the legal access to bless the remaining 90%, to turn the “not enough” to “more than enough“. My notebook is filled with testimonies of his faithfulness in this aspect.
- Immediate Family: This is both OPEX & CAPEX and it varies depending on what we want to buy that month. It could be for school fees,vacation, rent etc or for just regular running expenses, about 20% is allocated here.
- Extended Family: This portion is dedicated to my mother,grandmother,siblings, friends & anyone that we are lead to bless as the case may be. Another 10% of our income is dedicated to this, we are always on the look out for someone to bless every month.
- Savings: This is very crucial in this discussion, there is a need to learn the difference between seed & bread. A farmer will always learn to retain part of his harvest as seed for the next season of planting. Your savings helps to do that. We usually allocate about 20%
- Loans: As highlighted earlier, develop countries look at your credit ratings & this is consistent with the modern age. From our financial education, we take loans only for assets & not liabilities. A good example is a mortgage loan, a loan to buy a land or property, we don’t take loans to buy a car or go on vacation. We allocate about 30-40% of our income towards servicing loans. With all of our obligations financially the golden rule is never to go beyond the 40% mark.
There is a lot to say on this topic, but I will pause for now.
My question to you is “How is the state of your finances?” Please check out my post on “State of Affairs” for additional information.
This is my snippet, I AM SHALOMESQ!!!