You can’t skip the basics and expect to succeed. You can’t swim if you can’t float, you can’t run before you can walk and you can’t create wealth without the fundamentals of money management. Let’s be clear I said ‘create wealth’ not make money.
You can make a lot of money without having the skills to manage, grow and keep it. But creating sustainable wealth, the kind that you pass from generation to generation, the kind that will take care of you into your old age as it continues to grow, to do that, you can’t skip the basics.
James, one of our alumni, called me last year asking for a special coaching session. He told me that their firstborn was going to school later this year and they also wanted to buy an investment property. I said, “Great! So what exactly is the problem?” “Where am I going to get the extra money to pay for all of this?” he asked.
“We have been budgeting as a family for a few months since we left your class and there is no money left over to afford the changes we want. We know all the big items like rent, savings, and loan payments and have been doing well in paying for them.”
“And the small items?” I asked, “Are you still keeping track of those?” “Ahh, those ones we don’t need to do anymore, we’ve become very good at watching our spending.” Was his response. After much convincing James agreed to start tracking his expenses again.
He and his wife would write down every cent they spent. He found that he was spending about KES 2,000 more on charity, KES 6,000 more on extended family support, KES 3,000 more on eating out, KES 800 more on parking fees and KES 4,400 more on grocery shopping than what his original budget was indicating.
That was a total of KES 16,200 shillings per month of unplanned spending. When we calculated how much school fees would cost him per month it came just over KES 8,000, and loan repayment for the property he wanted was about KES 6,000.
Going through this process, again, showed James that they had the money to do what they wanted, but because they were unwilling to stick to the basics of money management they were unable to realize their dreams. He already had KES 16,200 in his pocket and we hadn’t even started talking about how he could use his abilities to increase his income.
And so, for the avoidance of doubt, here are the basics of wealth creation:
- Know what you want – Have a clear defined financial goal
- Manage what you have – Track your spending and then budget. This means, make conscious decisions about what you do with your money.
- Plan for an increase – Become better at your job, use your skills, talents, and resources to create multiple streams of income.
- Save – keep some cash aside for an emergency 5. Invest – Put some money into growing assets
Article Written by Waithaka Gatumia (CEO Centonomy Ltd)