Better Money Management Skills

by Benard Solomon

Is it true that once you have a certain level of money your future income is guaranteed? Unfortunately, it is not certain. The life stories and habits of the wealthy doesn’t support the popular belief that the more you earn, the rosier your life will become. If a certain level of money were to create life fortunes, lottery winners would remain rich years after hitting the big bucks.

What about great boxers whose fortunes has suddenly nose-dived? Some Hollywood celebrities of yesteryear wouldn’t be living in abject penury if they had better money management skills.

You surely don’t wish to remain in the rat race all your life. Robert G. Allen in his book Multiple Streams of Income emphasizes the need to acquire good money management skills as the wealthy people do, so that you can become wealthy and financially free.

Your money skills will determine your financial future. Your money habit is the key factor to your character money- wise and your financial destiny. You will continue to experience long term lack and financial short comings as long as you remain unlearned in the skills of profitable money management.

According to Robert Allen… what you should do with the money you earn during your working years.

Better Money Management Skill # 1: Value and Control It

The very first money skill you must acquire is to value the money you earn. The money in your hand is likened to a seed. That seed could germinate and grow several money trees that will yield durable fruits in the future. Do you know that the single dollar in your hand is a potential one million dollars? You call that an exaggeration? Okay listen to this. Recently an analysis was done in the United States to know the actual value of a dollar several years ago as compared with its current value at the New York exchange. That one dollar was estimated to be more than $1 million. The money was put in instruments that overgrew inflation over the years. You can now see why you must not undermine the value of that naira in your hand? To practically achieve this goal, you must as a matter of urgency get acquainted with how you spend every dollar you earn. Strive to know more about your personal account. Prioritize your expenditures and spend your income in that order. Have a record of your personal finance in a durable book. I learned this lesson very early enough when I started my working career. I quickly bought a hard cover ledger book where I record my money spending habits to keep track of how my income is being spent over the years. The mere knowledge of how I spend my salary in the last 5 years has opened my eyes to several other things like the determination to take my financial future out of the hands of Government. I feel a kind of confidence and measure of power of that knowledge which has helped me to acquire financial discipline. I now know the true meaning of asset and liability. Anything you spend your money on without the prospect of making more money is a liability. Period!

Better Money Management Skill #2: Save It

This one is not new to most civil servants. They know how to do this very well. Nevertheless, I must point your attention to how to do it for maximum benefit. Your savings should be a tangible percentage of your salary. Financial experts suggest you save up to 10% of your income and if you can do better than that, good for you. One thing you must however work against is to allow your savings to be eaten up by inflation. Your goal should not be only to save but to ensure that your savings are not left at the mercy of inflation. Keeping devalued money is not worth the effort. You should adopt the principle of saving sufficient amount capable of sustaining you and your family for 3 months even if you are not paid your salary. The left over should be channeled to the next money management skill…

Better Money Management Skill #3: Invest It

This is what most income earners never learn how to do well. Some outright avoid it for fear of losing their hard-earned money and yet what they do not know is lacking is the information on how to be smart investors. I have taken it upon myself to speak to some senior civil servants on this matter; what I discovered left much to be desired. Some who invested put their monies on enterprise that will keep them enslaved after retirement. Most people do not understand investing. According to Robbert Kiyosaki an American financial expert, there are 7 levels of investors:

The 7 Levels of Investors

Investors Level 1

These people have no money to invest. They either spend everything they make or spend more than they make. There are many ‘rich’ people who would fall into this category. Unfortunately, this zero level is where about 50% of the adult population would be categorized.

Investors Level 2: Borrowers

These people solve financial problems by borrowing money. Often they even invest with borrowed money. Their idea of financial planning is robbing Peter to pay Paul. They live their financial lives with their head in the sand like an ostrich hoping and praying that everything will work out. While they may have a few assets, the reality is that their level of debt is simply too high. For the most part, they are not conscious about money and their spending habits.

Investors Level 3: Savers

These people put aside a ‘small amount of money usually on a regular basis’. The money is in a lower-risk, low-return vehicle such as a money market checking account, savings account, or certificate of deposit. They often save to consume rather than to invest ( e.g. they save for a new T.V., car, vacation etc). they believe in paying in cash, they like the security of money in the bank.

Investors Level 4: Investors

There are 3 different types of investors in this group. This level of investor is aware of the need to invest. Generally, they are intelligent people who have a solid education. They make up what we call the middle class. However, when it comes to investing, they are often not educated….

Investors Level 5: Long-Term Investors

These investors are clearly aware of the need to invest. They are actively involved in their own investment decisions. They invest in their education before actually buying any investment. If you are not yet a long-term investor, get yourself there as fast as you can. This means that you sit down and map out a plan. Get control of your spending habits. Minimize your debts and liabilities. Live within your means and then increase your means.

Investors Level 6: Sophisticated Investors

These investors can ‘afford’ to seek more aggressive or risky investment strategies because they have good money habits, a solid foundation of money, and also investment savvy. They are focused, not usually diversified. They often buy investments wholesale rather than retail. They are well-educated in the world of investing and actively seek new information.

Investors Level 7: Capitalists

Few people in the world reach this level of investment excellence. In America, less than one person in a hundred is a true capitalist. A capitalist’s purpose is to make money by synergistically orchestrating other people’s money, other people’s talents and other people’s time. It is the capitalist that provide the money that create the jobs, the business, and the goods that make a country prosper. These are the Kennedys, Rockyfellers, Fords, J. Paul Gettys etc. There you have it; my menu on the 7 levels of investors. Read it over and over again to know where you belong and how you can improve on your money habits. Let’s now continue with Money Management skills….

Money Management Skill# 4: Make It

Making money is entirely different from investing it. This is the entrepreneurial side of money. If you are not an entrepreneur yet, learn to become one. Everyone will need to create multiple streams of income in the future. The truth is no matter what profession you belong to, the present world economy does not favor a monolithic career in a single lifetime. The craving for downsizing and re-engineering or reform globally by government and private establishments necessitate that you retrain yourself and acquire more money-making, marketable skills. Opportunities abound in computer communication technology for whosoever cares to improve his family’s financial fortune. You must learn the skills of being your own boss, even if you are working for a solid corporation and plan on retiring there. The world is just too insecure to make long-term plan with one company. You can make money from what you are good at. Get on purpose. Do what you love and the money will follow.

Money Management Skill #5: Shield It

Making money is one set of skills. Keeping it is another. As you work toward your financial goals, you will need to learn how to preserve the wealth you are creating. You must learn how to get your homes, cars, and business entities out of sight through corporations, trusts, and family partnerships to build a financial fortress around your assets. Do not create problems for your wife and children after your death. Make sure they do not fall prey to greedy relations who went to reap where they did not sow.

Money Management Skill #6: Share It

This is the last money management skill I will share with you. Remember the story of Harvard University which was rated the best in the world. Most of its facilities are not from the American Government but from wealthy Americans. You multiply what you have now through giving. The more you give, the more you too continue to receive. It is better to give than to receive. Be a consistent giver. Pay your tithe regularly and consistently. Identify the needy around you and show them mercy. Remember that the ultimate purpose of having money is to help others.

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