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Personal Finance: How To Make Money An Enabler, Not A Distractor​

Personal Finance

Would you like to enjoy greater financial prosperity regardless of your age and income? Personal finance is a topic that is not frequently discussed among people for various reasons. This explains why some people struggle with it for a large part of their lives. I am no exception.

Everyone dreams of achieving financial freedom one day. However, less than 1% of the population achieves it because they don’t have the discipline along with the know-how to achieve it since personal finance is not taught in schools.

This explains why many people are struggling financially.

In fact, the easiest way that I have learnt to achieve financial freedom is to follow someone who has done it before and do what he has done to achieve it.

Instead of living in the fantasy of achieving financial freedom one day, why not make it a reality in your life today by taking some simple steps?

The first question that I needed to ask myself is how much money do I need to achieve financial freedom?

According to Robert Kiyosaki, author of the famous book, Rich Dad Poor Dad, it is recommended for me to have an income of at least 10x that of my monthly expenses.

To facilitate the process of determining this figure, I did an exercise to find out what my family requires in a month.

My personal finance in numbers​

List of Fixed Expenses (Monthly)
List of Variable Expenses (Monthly)
List of Fixed Expenses (Yearly)
Total Expenses for Year 2020
5 Years Projection
Conservancy - $100.00
Internet - $60.00
Phone Bill  - $25.35
Health Insurance - $112.05
Hair Cut - $12.00
Seminars - $48.00
Group Meeting - $3.00
Team Meeting - $6.00
Personal Development Audios - $20.00
Book - $25.00
Utilities - $100.00
Personal Use - $600.00
Transport - $100.00
Food - $100.00
Grocery - $1,000.00
Miscellaneous - $200.00
Web Hosting / Domains - $464.00
Elementor - $224.00
Health Insurance - $64.00
Property Tax - $100.00
Business Names Renewal - $200.00
List of Fixed Expenses (Monthly) + List of Variable Expenses (Monthly) + List of Fixed Expenses (Yearly)

$411.40 + $2100.00 + $1052.00/ 12 = $2599.06 / mth

In a Year :  $2599.06 x 12 = $31,188.72
2020 - $31,188.72
2021 - $34,307.59
2022 - $37,738.35
2023 - $41,512.19
2024 - $45,663.41

If you looked at the table above, my yearly expenses for the year 2020 would be $31,188.72. If I extrapolate the figure by 10% (inflation) for every year, I will get a whopping $45,663.41 in 2024.

That explains why it is important for me to learn how to invest my time in building an asset or leveraging my money in proper vehicles to fight inflation and build wealth.

If I were to follow Robert’s recommendation of 10x expenses, I would need to create an annual income of $457,000 by 2024 if I would like to achieve financial freedom in that year.

Once I have determined the figure, it was clear to me that I needed to work harder in my business in order to achieve my goal.

A roadmap to financial prosperity​

I was recommended by my mentor to read this book, “The 4 Laws of Financial Prosperity” recently and it opened my mind to how simple it is for anyone to take a handle on this subject of personal finance.

Being a budding entrepreneur, it is important for me to learn how to manage my personal finances well.

If I can’t even manage my own finances, how can I manage a company’s finances where the figures are much bigger?

There are 4 laws of financial prosperity outlined in this book to help anyone to realise the most efficient use of your money in achieving your financial goals.

The 4 Laws Revealed...​

Track

1. Track

Start tracking your daily expenses.

Keep a record of every financial transaction and every dollar that you spend.

You can use personal finance mobile apps like Money Manager, an Excel spreadsheet or the traditional way of writing them in a notebook is fine too.

This will help you to uncover inefficiencies in your spending and find areas/leaks to reduce your expenses.

2 to 3 minutes a day to record down your transactions.

The process of tracking will improve your financial situation.

target

2. Target

Set realistic financial targets.

Write down all your priority targets with debt free being the first one followed by other aspirations that you have. Eg: “I will be debt free in 5 years.”

Your targets/goals should be specific, measurable, attainable, realistic and time-bound.

Past your list of aspirations in front of your bed, read it before going to bed and first thing when you wake up.

Most importantly, it must be your own.


You can’t create a plan to go somewhere if you don’t know where you want to go.

trim

3.Trim

Live on less than you earn so that you can have a surplus to get you out of debt and invest in assets that appreciate.

Trim your living expenses to 90% of income.

Spend differently.

Pay yourself first when you receive your paycheck.

Then live on what’s left for the reminder of the month.

Write down all your debts, the interest you are being charged on each, the monthly payment and the balance reminding.

On another piece of paper, list the debts in order, starting with the one with lowest balance and determine how long would it take for you to pay off the smallest debt.

How long would it take to pay off the next debt?

Add the payment for the previous debt onto the next debt and repeat the process.


The key lies in trimming...

E.g.: Cancel those unnecessary charges like cable TV, overseas calls, video rentals, checking services, do your own laundry, turn the water heater down, buy discount clothes.

With the additional cash available, you can use them to pay off your debts faster.​

train

4.Train

Attend investment events or read books on investments.

Once you get out of debt, start buying things that appreciate in value.

Collect interests instead of paying.

Summary

1. Track your daily expenses.

2. Set targets.

3. Live on less than you earn.

4. Pay yourself first.

5. Get out of debt.

6. Get to where you are collecting interest instead of paying it.

7. Look for places to put your money to work.

Applying the 4 Laws in my life​

I have been practicing the 1st law for a few years but not the remaining 3 laws until recently when I finished reading the book.

Upon reviewing my finances, I found out that I am spending too much money on my phone bill and medical reviews.

Therefore, I decided to switch to a SIM only plan instead of the usual mobile plan which comes with a 2-year contract and a new phone. By doing this, I managed to cut my expenses by $15 a month.

As for my medical reviews, I decided to incorporate healthier lifestyle habits into my life by getting regular exercise, enough rest every night and opting to take natural remedies like turmeric, neem and some plant-based supplements to improve my health. This has helped me to save $90 a month.

I have bought a few investment related books like The Intelligent Investor, Security Analysis and The Candlestick Course to start reading and improving my knowledge in this field. Finding a mentor to coach me on investments is something that I will do when I have accumulated enough wealth to do that. :)

Final Thoughts

Financial wellness and prosperity is about placing life where money is helping us accomplish the things that are important to us rather than be a factor in our lives that is creating stress and getting in the way.

It has nothing to do with your income like what most people think. It has everything to do with how you manage your money.

Having financial order and control in your life lays the foundation that enables you to devote more time, energy, creativity and money to family, hobbies, even community and humanitarian service.

It allows you to make money an enabler and not a distractor in your life.

edmund
Edmund Yeo

Edmund Yeo is the owner and editor of YeoInternational.com. Learn more about him here and follow him on Instagram, Facebook and YouTube

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