Where does all my money go?

How many times have you said to yourself, “Where does all my money go?’’ Some people believe that the problem of lack of money is a spiritual problem while some people believe that they do not earn enough hence the consistent state of lack.

Money is one of the tools that is used to acquire wealth and a medium of exchange in form of coins and banknotes. It is the medium in which prices and values are expressed; it circulates from one person to another person, country to country, facilitating trade, and the principal measure of wealth. It gives one the power to purchase and the means of empowerment.

People who treat money as a tool of empowerment to achieve financial independence most often succeed in their journey to wealth creation.

One of the key factors to be able to track your money expenses is your ability to attain financial prudency.

Financial prudency means planning well in advance and investing in areas where you can expect high returns.

It also means having complete knowledge about the money you have, the money you don’t have and how you can make it grow.

Handling finances can be a difficult task and it is essential to inculcate prudent habits when it comes to money matters.

1. The number one habit you should cultivate is “cut back on unnecessary expenses” —always work with a list of your expenses, and prioritize them into different buckets. Important but not urgent, Important but urgent. Beware of little expenses; a small leak will sink a great ship.
2. Buy things that only add value to you—Never spend money on things that don’t add value to your life. I know the idea of value is subjective, however, make sure that whatever you invest in adds to your personal growth, or character and helps you achieve your goals. Ask yourself the next time you go shopping for something: “What value will this add to my life?” A good purchase is one that feeds your soul and contributes to supporting your body, mind, and spirit. What you NEED is different from what you WANT. So if you “WANT” something that you know you don’t really need; your question should be, can I afford it?

If you have recently bought items you regretted, then sell them off. Go online and get money in exchange for them. There are so many online platforms where you can sell off items.

3. Make sure you create a dedicated savings account. Ensure this account does not have any means of withdrawal. No debit card, no internet banking access. No matter how pressed you are for funds, this account will not be accessible. Create a weekly or monthly debit instruction from your income or salary account into this dedicated savings account. This will help you to save and earn interest while savings.
4. Avoid impulse buying. We have often discussed the issue of impulse buying on this column and I am sure many of you have learnt a few tips from this. Impulse buying is the number one enemy of wealth creation. Allow me to spend a little more time here, so we can all overcome this “demon”.

In a study done by Mattila and Wirtz in 2008, they found that when a customer perceives that their environment is over-stimulating, they are more likely to make an impulse purchase.

In a recent study, Czrnecka, Schivinski, and Keles found that cultural values such as individualism and collectivism are determinants of impulsive buying and money budgeting. The researchers reported that different levels of globalization in terms of global consumer culture influence proneness to impulsive buying and poor money budgeting.

Vernon T. Clover found that impulse buying greatly impacts the sales of a store, and without the income that comes from impulse purchases, retailers, such as bookstores in Clover’s study, would not be able to stay open. Because of this, Clover implored retailers to make impulse items more readily available for customers.

A study published in the June 2008 issue of the Journal of Consumer Research suggests that consumers are more susceptible to making impulsive purchases for one brand over another if they are distracted while shopping.

5. Pay off your debt- never wish off your debt. Make it a project to pay off your debt. Pay off the most expensive debt first, stop your credit card spending. Debt is the slavery of the free. If you owe someone money, get on a plan and pay them.

Freedom from debt is worth more than any amount you can earn. Pay off your debt, you deserve to have your own money

6. Take advantage of discounts and special offers. There are seasons where you can get special discounts and offers for the things you need to purchase. Look out for those seasonal, holiday, discount offers and create a budget for them.
7. Find an additional source of income. One of the ways doing this, is to look at your skills and pin down top three things you can do effortlessly. Monetize them and create a market for them.
8. Be financial literate. Its no longer cool to be ignorant concerning simple financial matters. Read financial books, sign up for online courses on financial planning. Attend my quarterly financial planning classes for women.
9. Don’t procrastinate. – Don’t put off tomorrow what you can do today. Procrastination is one of the biggest thieves of living the dream life you want, and it is a common trait in humans. Napolean Hill, author of Think and Grow Rich, described it perfectly: “Procrastination is the bad habit of putting off until the day after tomorrow what should have been done the day before yesterday.
10. Create a long term investment plan. Typically, long-term investing means five years or more, but there’s no single definition. By understanding when you need the funds you’re investing, you will have a better sense of appropriate investments to choose and how much risk you should take on.

If you are able to form these 10 habits, you can attain financial prudency.

Tell me your views and challenges with regards to these tips.

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