As the year comes to an end, several individuals take it as an opportunity to assess how their year has panned out. With New Year resolutions mostly not met, many feel let down but I sat down with my wealthy elder brother and picked a few gems on investing and life that I believe are worth sharing. What inspired me most to talk to him was the fact that he once took an eight-month leave from work just to spend time with his family and tend to his personal matters.
1. Learn the art of eliminating an expense.
Expenses take away money from our pools of income or wealth. Most of the expenses that eat into our earnings are usually bad habits that if we look keenly at ourselves we can honestly do without them. It could be as simple as carrying packed lunch to work and saving the daily Sh300. It could involve doing away with your monthly gym membership and starting an evening or morning jog each day with your partner as you enjoy the serenity of the environment and family bonding time.
While this change could seem small and insignificant, the net effect is huge and it also enables you to mentally believe that you can cut down on expenses. Remember, wealth creation is a state of mind in itself.
2. Settle your debts.
You will never achieve financial freedom when you owe others money. It is that simple. My brother believes the ability to pay away your debts is top on his list even higher than investing. Use the money you have and draw up a realistic plan that will help you settle all your debts over time.
In case your employer gave you a Christmas bonus this December, why don’t you use part of it to settle some outstanding debts rather than purchasing luxuries that will eat into your sources of income like cars that will need to be fuelled or maintained through regular visits to the mechanic.
3. You won’t get away with lack of financial planning in this life
Life has phases, you need to work hard like a dog in your twenties, at this age group the objective is to gain more skills. In your thirties, your career path will be clear, make prudent financial decisions this early and enforce them in your forties. These prudent habits will enable you to relax and enjoy your old age.
Do not be misguided that you will start investing in your 40s; if you cannot develop this habit in your youth then you will spend your old age seeking financial freedom by working extremely hard to compensate for lost years.
4. Start investing today
Do not postpone the time to start investing on the premise that you are young or it is too little to start with. Investments add to your cash inflow, and the more you have investments that earn you money the better your cash flow.
While investing is great, always remember to only spend the interest from your investments and not the principle. Seek investments carefully and it pays to seek professional advice and not fall for quick rich schemes as the journey to wealth creation takes time. My brother chooses long-term high quality, low volatile and dividend paying stocks.
Another area he loves most is investments that make him liquid, i.e. have a good cash flow. He notes that many starting to invest tend to only focus on capital intensive investments while other cheaper and more viable options are around.
His bottom-line is, with wealth creation and financial freedom, the choice lies with each individual. Do you want to spend your old age working like a twenty year old or do you want to spend it reaping what you sowed?
5. Calculate your 90 day financial position
Take all the amount of money earned (income) in a period of 90 days then also take your total monthly expenses for the same period and check the balance. Ask yourself where this money goes, is it wasted on luxuries and if so what better way can you utilize it.
The ability to know your financial status in this period helps you to make wise investment decisions. It tells you whether you are plunging into debt and if so, what measures are needed to turn around the situation.
The main aim of this is to know whether every 3 months you are losing or gaining money.
6. The real joy of wealth is in sharing.
While the search for wealth involves cut throat business competition, money and the material success it brings is fleeting. A business you spent years to build can crumble on a dime. Never derive your joy in material possessions but instead use your wealth to help the needy.
My brother and his wife have personally chosen a few charities they are passionate about. They fund these charities with their after tax income, and he derives so much personal joy and contentment in giving back. He remembers the various scholarships that put him through school and believes that by giving back he is also paving way and giving chance to others.
My brother also believes that there are health benefits like being stress free and avoiding high blood pressure, heart disease that are derived when you are generous with your wealth. To him, the main purpose of his acquisition is not to deny others but to leave the world a better place.
Finally, in 2019 as my brother, who was 39 years at the time drove me home, I learned so much, and now understand why I once saw him on an eight month unpaid leave just to relax, travel and take care of his family and investments. I am convinced that it is not too late for anyone who wants to start. – By David Onjili
