Interestingly, the same thing happens when it comes to personal finance; we acquire tons of knowledge but how much of it do we apply? Here are a few personal finance basics, few people take their time to practice:
- Have a budget: It’s a word dreaded by many, even though they know this is the very first step for anyone who is used to spending money as it comes in. We know we should track our spending for at least a month to stop leaks and ensure a realistic budget, but how many of us have done so?
- Pay yourself first: We know we should save. We’ve even heard we ought to have six months’ income in savings. Yet, few of us actually do so. Whether you choose to download an app that helps you save, join a ROSCA (ajo/esusu)or buy a kolo (wooden piggy bank), you know you should pay yourself first by saving 10% of your income. This helps you build funds for investing. Have you started?
- Invest: We’ve heard that piling money in a savings account never made anyone truly wealthy. We know that we should invest that money and grow it so that it works for us, keep track of all our investments and be sure to study our monthly statements. However, many of us are still saving only.
- Increase earning power: You need to earn more; there’s no doubt about it. You know you should position yourself to earn more money. Whether it’s taking a course to increase your chances of getting a promotion, looking out for a better-paying job, or starting a side hustle, making a little more money is a great way to pay off your debts faster so you can get to the important business of saving and investing. Are you taking action in this regard? Aha.
- Pay off debt: You’re aware that when it comes to your financial health, your first big project is documenting and eliminating your debt, starting with the smaller ones. Most of us know that even though this could take all year, it’s a very rewarding process that’s crucial to our financial freedom. Yet, we do the exact opposite: keep on borrowing.
- Using windfalls wisely: While it’s not a bad idea to treat oneself from time to time, lump sums are better channelled towards goals like becoming debt free, getting a certification, or investing in a new business; something memorable that will keep yielding returns. Despite all we know about this, we still squander bonuses and cash gifts.
- Plan for Unexpected Expenses: How many times have been reminded of the importance of emergency savings? The last thing we want is for something to happen unexpectedly and upset the stability we’re trying to build. We know we should be pro-active about this, but somehow we never get round to it. Instead, we keep hoping nothing happens even though we know this is not the right way to live.
Will 2018 be different? It’s up to us.
Feature Image By www.africanleadership.co.uk