As I had promised, I wanted to share some money discipline tips, which I have learnt the hard way, so that your finances are secure, even if you never become Elon Musk or Jeff Bezos.
On the road the financial freedom, there are a lot of pitfalls that seem to be paved with the best of intentions: buy land it is rent seeking, invest in bitcoin, pay for this seminar or buy my “making it big” handbook with first month free…
However, like everything else, financial stability is first and foremost a way of life and not your means or source of income; and ironically what holds true since the birth of money still holds true till today.
The best way to know the practices that result in financial stability is not to listen to the tricks and trades of high net worth individuals, or even wealthy families but rather examine those businesses that have survived decades or even centuries, weathering storms, recessions, financial crisis, and are still standing stable. What do they all have in common? Well is it, their ABCs
- Accounts: Before, you can understand anything about your financial situation, you need to first have accounts. If you don’t track how you earn and how you spend on a daily basis, you are still at the starting point. This is why you here about insanely rich people going bankrupt. Financial stability is a game of balance, so you first need to know what you are playing with- where are the chips stacked, in inflows or outflows?
- Budget: The idea behind a budget besides helping you plan your finances and trying to build the lifestyle that will make you financially stable, is that no matter how well you plan, reality will ALWAYS be different. Therefore, just drawing up the budget at the beginning of the month is not enough, you have to look at the expected vs the actual at the end to understand the cost of your lifestyle and weigh that against the most realistic lifestyle you can have based on your earnings.
- Cost Control: The next step is the balancing game; and it is always easiest to immediately cut costs than grow earnings. There is always something that can be reduced when you start this exercise, whether it is your morning coffee at My Coffee, or your overseas vacation at the end of every quarter, you just look for the next best alternative.
- Sales growth: Now, everyone wants to put sales growth as the first thing. I just need to make more money. But even the Bible is very clear on this, if your are not penny wise you will be pound foolish. Increasing your income not only takes time, but it should be the last thing you do on the road to financial stability. Trust me no matter how high it gets if you do not effectively balance the game then you will never have that assurance of stability. However, to effectively grow sales you must increase the value you provide, and value is inherently linked to how many problems you can solve and how well.
Now that we know the rules, the aim of the game has always been to ensure that INFLOWS are equal to or greater than OUTFLOWS, no matter what type of outflows they are. However, it won’t be much of a game if there wasn’t anything to beat or overcome, so outflows are uncertain. Therefore, we need to accumulate inflows for this unpredictability of outflows.
Heck even squirrels save acorns for winter and bears stock up on body fat before hibernating.
As much as it is a game, it is the game of life, as financial stability determines your quality of life and there are a lot of cheat codes/hacks for it: a health diet and active lifestyle can reduce medical outflows, multiple skill set can increase inflows, emotional intelligence and disciple can help with the ABCs e.t.c.
Well then enough said, enjoy the game.