David’s story helps you think about who really smiles to the bank when you get paid. Do you want to truly smile on pay day? Yes? I know you do coz you’re here. This one’s for you.
Your heart and priorities
This month at church, we’re going through a series titled “End Month: Making your personal finances last”.
It’s amazing what valuable lessons scripture has about money – lots of similarity with stuff I’ve learnt from money books and personal finance courses.
Knowing where your money goes is an important step in finding your way to wealth. Sounds obvious and simple, but it’s a very powerful concept. Have you heard something like this before?
If you follow where your money is going, you’ll find your heart - Matthew 6:21
What about what James W. Frick says below?
Don’t tell me where your priorities are. Show me where you spend your money and I’ll tell you.
Quite true. And it’s hard to argue with him on that. At one point my biggest expenses were dance and travel related. Those were my priorities.
What are your priorities?
Spy on your money
Imagine you’ve been hired as a private investigator. Spy on your money for the next 2 weeks. Where does it all go? Every single cent counts. Transaction fees included. Keep a daily record.
Compile your findings after 2 weeks and present them to yourself over a small treat. Hey, private investigators get paid, yes?
You can get templates and apps online to help you with this. Or use pen and paper. Or spreadsheets if that’s your style.
Thinking about expense tracking as a game where I keep score of who had the last laugh with my paycheck helped me build the discipline to track my expenses daily since November 2015. Every single one.
Here’s a simplified version of the spreadsheet I use to spy on my money that you can copy and use. It’s got some example entries from David’s story. Five minutes max every evening is all I usually need to add my expenses for the day.
Find the best “investigative reporting tool” that works for you.
Now you’re ready to S.I.T your way to wealth
I came up with the acronym S.I.T after hearing Robert Kiyosaki, author of “Rich Dad Poor Dad”, explaining how he always Saves 10% of his income, Invests 10% and Tithes (or gives to charity) 10%.
Apply this concept and you’ll be headed in the direction of wealth. You can use a percentage other than 10. The concepts still apply.
Is it just me or is giving away 10% of your income so hard?
I used to struggle with this one till last year. It amazed me, when I started tithing consistently, how much I’d earned (10x the tithe). Sometimes, I wondered where in the world the rest of the money had gone.
Tithing has a surprising, positive side-effect. It helps you not “hold on too tightly” to your money. I learnt to live happily on 90%. Consistently giving to a cause other than me also taught me to be more generous (less selfish).
Tithing helped me develop the financial discipline I needed to pay myself (S.I - save and invest).
What’s your experience with tithing?
Paying the government is hard but easy. It’s a legal requirement. It happens automatically for employees.
Savings - your fall back money if you lose all your sources of income unexpectedly.
You’d profit from making saving a legal requirement for yourself. Automate it as much as you can.
Your savings are a plus during emergencies, for short or long term (dream) projects, to get loans and more good stuff.
Some of the money you can label savings include money in a:
- Savings Account
- Call or Fixed Deposit
- Education, Retirement or Other Funds
Would you like to save 100k somewhere and find it gone or less than 100k when you need it? Savings are different from investments – keep them in safe places you can access when you need to.
Yes, money can be saved under mattresses too but it’s so much better to save it further away.
What’s your experience with saving?
Unless the places you park your savings give you better return than inflation rates, you’d benefit from learning to invest once you get to a comfortable level of savings.
Investing is you giving your money a (profitable) job or business to do for you.
If you’re a smart boss, your money will do a great job of recruiting more money and come back to you multiplied.
There’s also a risk that some of the money you invest won’t come back. And you should be OK with that when it comes to your investment money. This is business.
If you’re open to learning and have some savings to fall back to when times get tough, consider money lost the school fees you had to pay to get more smarts.
Here’s a nice definition of what an asset is (the best place to invest your money):
An asset is something that puts money in your pocket - Robert Kiyosaki
So homes and cars, unless they put money in your pocket, are not assets.
Some places you can invest your money include:
- Treasury bills
- Investment funds
- Real estate
Businesses are some of the riskiest places to invest money in but also have some of the greatest potential for return.
Some of the lowest risk investments are Treasury Bills and Government Bonds. Given the previous average interest rates on 6 and 12 month Treasury Bills in Kenya was 11%, you should favour investing in places that promise more than that.
Be the boss of your money
Are you the boss of your money? Or is your money the boss of you? Here are 7 be-the-boss tips I’ve found most useful:
- Put your savings and investment money in different accounts from your income account to make it harder for you to spend.
- Automate saving, investing and tithing. Or make them priority payments when your money checks in.
- Set a day or two per month to S.I.T and pay other bills (minimise charged bank and mobile money transactions).
- Spend on your essentials first after paying yourself.
- Be generous (spend on family, friendships and charity).
- Spend on your extras (I never said don’t spoil yourself).
- Invest in learning about money and managing it well (learn from courses, books, people, …).
I highly recommend those two resources for their easy-to-relate-to and thorough approaches to financial education.
Have a plan for your money
Being a boss means making decisions and having a plan for your your money. If you don’t tell it where to go, it will find it’s way into the arms (or pocket) of someone who will.
Some call it budget. I call mine a money flow plan – deciding where my money will go.
I made a money flow planner that you can download to help me easily decide how much money to spend where.
It’s a 3-in-1 planner for different incomes: taxable (gross) income, tax-exempt income and net income (taxable income less tithe and tax). David would have been at a better place if he had this or something similar.
Enter an income amount and it will calculate how much should go to different types of expenses including: Savings, Investments, Tithe (SIT). Make a copy and have a go at it.
After I get the numbers from the planner: I start with S.I.T, spend on essentials, do charity and then I have the license to use the rest on extras knowing I already took care of the most important things to me.
I’m still learning and improving as I go along. Here’s your chance to help me and others…What tips do you have for SITing your way to wealth? What challenges do you face saving, investing and tithing and how do you deal with them right now?
I’d love to hear your thoughts - Tweet me.
– Evans “Cheering you on your wealth journey” Musomi.
P.S: Till next time, I’d like to challenge you to become the most valuable person you were designed to be. Take care.
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