All of us wants to have a financially secure future. But for us to be financially secure we need not just wish for it to come but we need to learn how to take charge of our money and do some concrete steps to ensuring a financially secure future for us and our loved ones. Here are the Top 10 most effective advice that I often share to friends and colleagues, as follows:
1. KNOW YOUR NET WORTH
I am not referring here to your worth as a person but rather about the total net monetary value of everything that you own net of all your financial obligations. To know your Net Worth, you need to add up all your assets or anything of value that belongs to you (cash on hand or in bank, investments, insurance, clothing, jewelry, house, car, yacht, etc.), then deduct all your liabilities or financial obligations (bills, loans, credit card debt, insurance premiums, etc), and the balance is your net worth.
There are 2 kinds of expenses by the way, one is that which takes away money from you without any more money coming back to you. Another type of an expense is that which you spend on something that gives back money to you. The latter kind of an expense can be in either forms such as an investment, capital expense, inventory, and other things that will give money back to you.
2. SAVE SMARTER
Some people save harder but they are not saving smarter. It is always good to save, save money for retirement, dream vacation, new house, or even for unexpected emergencies. Most often when we save money, the usual route we take is to deposit it in a bank savings account which can only gives you a very small return. The better approach is those allocated for monthly expenses and short-term expenses be deposited in your savings account for easy access especially during emergencies, but put the other spare amount that you want to save in some investments that can give you a higher rate of return than your savings account even after taking into consideration the prevailing inflation rate.
For example, instead of placing your money in your regular savings account which can give you around 1% interest per year, why not place the same amount in Treasury Bills that can give you somewhere around 1% interest per month! That spells a lot of difference.
3. PLAN FOR THE FUTURE
Whatever major expenses that you plan to have in the future like buying a car or going for that dream family vacation, you need to plan ahead and know how much it costs and how much pocket money you need for some extra expenses, doing this will spare you from sometimes humiliating surprises. Then you need to plan how you intend to raise that much money from today and into the future.
4. PREPARE YOUR BUDGET
Have you ever been into a panicky situation where you are running low on cash while your next payday is still 10 days away? To avoid this situation from occurring again, you need to discipline yourself into making your budget and sticking to it, however hard it may seem. To do this, it always helps to list down and add all your projected income then deduct the sum of all your projected expenses, and these amount should be your spending limit.
But what would you do if the result is negative, meaning your expenses is greater than your income? The best approach is review your list of projected expenses, then prioritize all those things that you can't do away with like your baby's food and milk, groceries for the house, monthly bills, etc and identify all the other expenses that can be done away with, such as going to the movies, dining out and other unnecessary expenses until you are able to reduce your expenses to the barest minimum and have a positive result.
5. AVOID INCURRING SO MUCH DEBTS
Manage your debt exposure by taking only as much debt as you can surely afford, meaning, before you decide to buy something on credit, better ask yourself first if it is really necessary and if you can actually afford to pay the bills when they become due. If it's otherwise, then better forget it, even if you really crave for it to death! After all, you now want to take charge of your money, right?
6. TEACH YOUR KIDS HOW TO HANDLE MONEY WISELY
Kids usually want to buy everything that catches their fancy. Oh I understand those of you who gets mad instead of being relaxed when inside the mall because of all those demands that your kids do to buy something, from ice cream to toys and nice shoes and cool electronic gadgets. Whew!
Early on in their childhood, it always pay if you as parents already start to teach them the difference between what they need and what they want. And teach them too the value of prudence in spending, the virtue of saving money and teach them how to grow money instead rather than spending them right away. You will become a happy, satisfied and proud parent if you teach them early on in life the virtues of budgeting, saving, investing, being content, delaying gratification, and being good steward of money.
7. SPARE SOME FUND FOR EMERGENCIES
Emergencies can never be predicted when to occur but you can always anticipate it by being prepared just in case that can happen. Such emergencies can really become an annoying emergency situation of you are not financially prepared for it. Always put in some amount for your emergency fund regularly, and do not take something from it just because nothing is happening yet anyway, because you don't know when such situation occurs.
8. GET INSURED
It always pays to get a life insurance and a health insurance because you will never know what may happen in the future. This is for the benefit of your family and loved ones to spare them from any financial burden just in case something wrong happens to you, especially if you are the breadwinner of your family.
9. ALWAYS DIVERSIFY YOUR INVESTMENTS
Do not put all your eggs in one basket, as they say. Diversify your investments over different types and asset class so that when one or two of your investments are not performing well, you will still have the others left still giving you good returns, and when you average the returns and losses, you still end up gaining something.
10. LIVE THE LIFESTYLE YOU CAN AFFORD
Our human tendency is always to keep up with the Neighboring Joneses. Always be conscious of your budget and stick to it. Do not bother if they got the cable TV connection and you do not, if that is what your budget can afford. Do not get insecure, rather be glad that you are not yet in a position to throwing away your money as they do.
Cut cost whenever necessary. If the gas price goes up, use the public transport. If your SUV is a gas guzzler then trade it for a sedan. Living within your means is not something to be insecure about or ashamed of. It is more shameful to live a lifestyle that is only financed by loans which will later catch you up.
Not everything here is easy to do for some, but if you stick and commit to doing them all, you will be surprised to realize in the future that you have already become financially independent and a lot wiser! I wish you a well lived life because God loves you.
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Learn to start taking charge of your money and your financial future.
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