We all have financial goals, even if it’s as vague as “I want to be richer than Dangote”. The part most of us miss is the financial planning, very few of us actually plan our (intended) way to wealth. Yet we know the age-long adage of – He who fails to plan, plans to fail; Poor planning leads to poor performance; and many others.
Immediately after my NYSC and I got a taste of what it means to be on-your-own, I started taking my financial life seriously. I read every book and personal finance articles I could lay my hands on, bought audio books on personal finance, budget planning and money management.
When my confidence soared high enough, I decided to put my vast knowledge to work. And in this article, I intend to share with you the very strands in the garment of my personal finance.
I currently work at a job I love but which leaves me with little money at month-end. Thanks to an Expense app on my Android phone, I daily take a record of all my expenses; I know where every single kobo of my salary goes. I know exactly how much I spend in a month.
The following are the Personal Finance measures I implemented –
1. Pay myself first
Since 2011, I set up a direct debit order in my salary account to transfer a certain amount of money every month to a Mutual fund account.
Now I plan setting up two others to transfer some cash monthly to my Brokerage account and quarterly to my Fixed Income fund account.
2. Have an Emergency fund
I currently have my three months living expense stashed away in a High Yield savings account. I have lost my job once and resigned from another too. In both situations, I encountered numerous unplanned expenses and ended up spending a lot.
Having an emergency fund can greatly help to tackle unforeseen emergencies. I never touch it unless there is an emergency, and I replenish it as soon as I can.
3. NSD, LSD and HSD
Increase your No Spending Days, never reduce your Low Spending Days and reduce your High Spending Days in a month. I try to achieve this by staying home on most holidays to increase my NSD, cut-back on unnecessary daily expense like chewing gums, shawarma and in between meal snacks to increase my LSD, and I only buy necessities to reduce my HSD.
4. 70 – 30 investment rule
Since, I’m investing for the long term (over 30 years horizon), I use 70% of my cash for investing in stocks and 30% in Fixed Income and bonds.
As a small investor, I rely on fixed income fund. But I follow the stock market like a true Arsenal FC fan follows his club, I know nearly all the important figures and trends. I research stocks, burrow through financial statements from 7 years back and make some crazy financial calculations.
I manage my own brokerage account without any professional help, I buy stocks of companies I’m convinced (after my calculations) will grow at over 15% year-on-year and sell the ones I believe have derailed (regardless of their stock price movement).
Result: Though, at first, I lost money after money, I have recouped all my losses and have found an investment style that works great (so far).
5. Delay my big expenses
I don’t plan buying a car anytime soon.
6. Create multiple income streams
Though, I currently make money from my investments, I still run three monetized blogs and a part-time consultancy. Currently, my blogs are yet to generate a profit and my consultancy biz is still in its infancy, but I know that with more time and effort invested I will be able to cover my living expenses from their earnings.
7. I’m my biggest asset
The premium on skills (hard and soft) is huge. That is why our parents make us start school as early as possible, knowing that one day someone will be willing to give us a fat pay slip just to have us around him.
Though I consider MSc and MBA as a luxury, I have been reading several MBA course materials. I spend a lot on books, some very expensive books too, on everything that interest me – swimming, business analysis, java programming, PHP and SQL programming, MS Excel and VBA, French, Linux, Personal finance, Investment, Self development, Spanish, German, novels…
Last year, I took an online diploma course in Stress Management by a UK school. And this year, I have already enrolled for a Finance course, Data Analysis course and History course via Coursera. I just recently concluded my video classes on History of the world since 1300AD, and learnt that there was a time when skilled workers were kidnapped. This reinforced my decision to become skilled in as many things as I can.
While at the university doing my degree in Electrical Electronics Engineering, I spent most of my library time reading several books on Psychology. I discovered that the brain doesn’t function like a bag, in which you’ll have to push some things out to make space for new things.
The brain doesn’t get filled, the more you use it the logically bigger and more intelligent it becomes. That was why Leonardo da Vinci could become an expert in nearly all the known human disciplines of his days. He simply used his brain. Since I discovered this, I stopped trying to focus on only just one field of knowledge.
These are the components of my financial strategy to reaching my financial goal. And so far, I’ve been progressing well and measurably. My financial life is so well planned and documented, that I can even make budgets and forecasts/projections. That’s how powerful having a financial plan is.
Do you also plan your own way to wealth? Are you a money manager or not? Please, let me hear from you via comments.
Thanks & Regards,