How We should think about money- Busting Money Myths (2)
In the previous edition, we discussed popular money myths that have governed our financial philosophy and hampered our desire for financial freedom.
It is important to realise that money is basically a tool and the results it yields depend largely on how we use it. Financial decisions, little or great, must be well informed and thought-out, factoring the future, near and far. By taking control of your finances, you can work towards financial freedom, regardless of your background or status. The following are critical factors to consider in shaping our philosophy about money and positioning ourselves for financial growth.
- How many income sources do you have?
You need to have revenue before considering financial growth. The first key factor to consider is your income source. How consistent is your income? Are there opportunities for extra income worth pursuing? An extra income source is always a plus on the journey to financial freedom.
- Are you living above your means?
If you are spending as much as you are earning, you are living above your means. To attain financial freedom, you need to segment your revenue to leave room for savings alongside catering to your needs. Warren Buffet advices that we spend only what is left after we have saved.
- Do you have achievable financial goals?
What are your financial goals? To buy your own home or raise capital to start your business? Whatever it is, ensure that your goals are SMART – Specific, Measurable, Attainable, Realistic and Timely. It is also wise to have a trackable plan towards achieving your goals.
- Do you have a financial plan?
Everyone should have a financial plan, both short term and long term. A financial plan helps you manage your finance by giving you a clear picture of what you have, what you need and what you will do to get what you need. If you require further knowledge about financial plans and how to create one, contact us to speak to a professional financial adviser.
- What is your attitude to debt?
Except in situations where it is tactical and strategic (for the purchase of an asset), borrowing is often a pit as it deducts from your future revenue before it even arrives. As much as possible, work towards managing your finances without resorting to loan, especially personal loans.
- What is your attitude to investments?
Savings is good and is essential for anyone pursuing financial freedom. Investments are however one step ahead of savings your money is not only preserved but also grown. Depending on your risk appetite, financial plans and goal, invest in asset classes comfortable for you. You could consider treasury bills, stocks, bonds, mutual funds or even real estate.
- What is your retirement plan?
It is never too early to start preparing for retirement, especially if you hope to retire rich. Setting aside a sum every month to your pension is an investment in the future. Where possible, consider Additional Voluntary Contributions for increased retirement savings and reduced tax load.
- Are you covered?
As you advance in life, financially and otherwise, it is important to consider insurance options available to you. Insurance helps guide against unnecessary loss in the face of unplanned circumstances and ensures our families are protected, should anything happen to us. As your assets and wealth increase, estate planning is an option you should consider. Wills, Trusts, and other estate planning instruments leave your assets and loved ones protected without hampering the growth of your investment.
Conclusively, financial freedom is attainable and worth striving for. Give it a try this new year, change your orientation about money and choose to become the master of your money, deliberately putting it to use. You will be amazed at the growth you will record as the year progresses.
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