Everyone has use for money if they can find it. Whether consciously or not, we all want it, work for it and think about it. Understanding basic finance is no longer a preserve of those trained and working in finance. It is an essential element of any serving or aspiring leaders. Financial knowledge is useful for business management, investment or portfolio management, financial markets and most importantly in our personal lives.
Steve Covey, in his book, Seven Habits of Highly Effective People, describes the seven habits of highly effective people and techniques for adopting the seven habits. Sharpening your finance saw and achieving personal financial independence will happen when you understand and adopt healthy habits adapted from Covey’s Seven habits.
- Be Proactive
People who are proactive control a situation by making things happen or by preparing for possible future problems.There are a number of ways you can take the initiative to manage your finances. With effort and creativity, you can actively monitor and control spending and maximize income by finding ways to spend less thus reducing expenses. Any money saved from reduced expenses can be channelled into savings and investments. You can also increase income through side hustles or by generating passive income in addition to controlling your spending. An extra shilling saved or an extra shilling earned both contribute favorably to the bottom line. Know how much money is coming in and how much is going out with great precision. Accomplish this by creating and following a budget, and proactively monitoring spending. Focus on what you can control within your budget to achieve financial success. Carl Gustav said “You are what you do not what you say you will do”.
Begin with the end in mind. Prudent people want to attain financial independence in the end. With the end in mind, make a plan to reach the goal and follow it every day. Frugal people are willing to worry about their finances now so that they don’t have to worry later. To achieve this, worry about time now as the popular saying goes time is money. The sacrifices along the way are worth reaching the goal.
Remember to put first things first. Having money to invest is the most important priority. What is the first thing you pay first every month? Mortgage? Utilities? Car? Pay yourself first – invest in your retirement before paying bills. If there is not enough left to save then look for ways of reducing your bills.
- Greatness is Secondary
It is the late Mohammad Ali who in February, 1964 declared in his legendary speech that he was the greatest just before taking on Sonny Liston in the world’s greatest boxing title. A great person is one who is distinguished, powerful, influential or formidable.
Power must be put aside if you want to succeed especially when it comes to personal finances. Personal finance does not require you to have any powerful influence. It starts with you in your own small way. Always think win-win. Steve Covey talked about win-win situations in terms of structuring deals where both parties involved get something beneficial. His point – someone doesn’t have to lose in order to make a great deal. Similarly, find ways of spending less and achieving great benefit. For instance preparing food at home is much cheaper and at the same time healthier than eating out. Consider the overall value the purchase would provide throughout its life including hidden expenses and potential benefits.
Generally, frugal people don’t start as frugal but rather start as normal spenders. Later they realize that less is more – at least for spending and debt. You should reach an understanding of how much you need to be happy. Make decisions of what you need and want and not what your friend wants. Do not mind what people think of you, after all spending money to keep up with others does not make much sense and it is not the pathway to long term contentment.
Synergize where you get an opportunity. Synergy is a concept that sometimes one plus one adds up to more than two. Is this possible? For instance if you decide to live without cable TV you save Kes. 5000. The outcome is that you not only save Kes. 5,000 but also a recurring expense. In the long run you reduce the amount of money you need in retirement. Another example is to reduce clutter. By reducing clutter over time, you require less space to store your stuff. You will find and use the stuff you have. Saving time and money will accumulate over time exceeding the effort it takes to nip clutter in the bud.
- Sharpen your saw
If you have read this, you have just sharpened your saw! Keeping your saw sharp is spending time well. Continue learning and finding new inspiration to get the most of your money. Reading about financial success and failures of others can provide motivation to keep your goals firmly in mind and on track. Abraham Lincoln said “Be sure to put your feet in the right place, then stand firm” Pick up good financial habits from the readings and focus on them to improve your financial situation.
About The Author
Joan Andia is a Finance and Credit Specialist with over 10 years’ experience in increasingly responsible, management positions with a comprehensive knowledge and experience in the range of financial management, credit management, change management and customer service disciplines. Andia has a passion to equip leaders and young people alike with basic financial knowledge to assist in proper financial decision making in all spheres of life. In her part time she does class coaching for accounting students and offers training to professionals whenever called upon.