You have heard the word “manage” a million times. If you live in the country I come from, then you may have equated the word with frugality or outright stinginess. While some people believe that money should be managed only when you have little, others believe we should only talk about managing money after reaching a certain threshold of wealth.
The truth is wherever you are in the wealth continuum, you must manage your finances. Therein lies the power for more. You don’t manage when you grow wealthy. You manage to grow wealthy.
That said, here are 5 ways to manage your money for wealth.
1. Make budgeting a lifestyle
Budgeting is that art we talk so much about but too few people practice. Many people think that budgeting is for the poor and needy. Some avoid it because they don’t know the ropes. Others are squeamish around numbers because they flunked algebra in secondary school. Budgeting is not some complicated math problem you must face every month’s end. It’s a simple snapshot of your periodic inflow and outflow.
Get a notebook, open a page and draw a line in the middle. On the left, list the amount of money coming in. On the right, itemise everything that will be going out for that month. This includes utility bills, food, transportation, data subscription, airtime and so on.
If you have dependents, you should add that too. Leave nothing out. The goal is to be as realistic as possible. Set your savings target too as well as a small sum of money regularly going to your emergency fund.
In the end, the expense side should balance with the income side.
2. Track your expenses
Have you ever looked back on a certain month and wondered where all your money went? You can swear you weren’t a wasteful spender. But the truth is if you traced it to the roots, you will catch yourself making ungodly purchases all through the month. My advice? Use a money manager app. Some apps you can explore include AndroMoney, MoneyManager, Moneyfy, Mint and a host of others.
3. Improve your money management skills
Let’s face it, if you are just starting to build wealth, chances are that you cannot afford a wealth manager yet. Therefore, much of the onus lies on you. You will be responsible for your savings, setting up an investment fund, scouting for investment opportunities and even taking the fall when things go south.
Don’t worry. With the right knowledge, you can sharpen your money management skills. Take some personal finance courses. Watch YouTube videos and listen to finance-inclined podcasts. When you grow big enough to afford a wealth manager, that knowledge will prove useful. You can get my book, You Too Can be Rich, for more personal finance wisdom.
4. Practice Financial Discipline
You cannot manage your money if you lack financial discipline. You cannot grow wealth is you cannot manage your money. The maxim, “faithful in little, faithful in much” holds water here.
If you must become wealthy, especially if you are coming from a not-so-rosy background, you must say no to some luxuries for a while to build your financial profile. Don’t go above your budget just to add that Armani pair of jean trousers to your wardrobe. When you’re faced between walking away and that stone-embedded handbag, remember your financial future.
These sacrifices may be painful at first but they will pay off eventually. Here’s a quote from Warren Buffet, “We don’t have to be smarter than the rest. We have to be more disciplined than the rest.”
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Today, I have chosen to limit this list to four instead of the usual five. I want your tip to make the #5. So, what other ways do you manage your money? Let me know in the comments.