About a year ago, I shared with my friends (on a different platform), some tips on how to become financially stable and live debt free. Recently, a friend suggested that I share the same piece on this platform as well. Hopefully, someone will find them useful.
Here they are:
Have A Budget. The first step towards taking charge of your personal financial situation is to have a budget. Have a budget for your daily/weekly/monthly expenses. Start by having a budget for only what is essential. In other words, plan your budget around what you need and not what you want.
Keep Track of Your Expenses. Just as it is important to have a budget, it is important to keep track of your what you spend your money on. Keeping track of your expenses will help you avoid the slippery slope of impulse buying. High income earners in particular, are at risk of going down this slippery slope. They often buy on impulse while reassuring themselves that their next paycheck is just weeks away. False! Nothing is guaranteed. Besides, impulse buying is a terrible habit that can lead to financial ruins. To avoid regrets this year, draw up a budget built around what is essential (what you need) and track your expenses. Remember to be honest with yourself about your budget. You will be glad you did.
Save. If possible, save more than you spend. For a lot of people this is extremely difficult. Very often the excuse is that their take-home pay can’t take them home. While this may be true for some, it still does not take away the importance of saving a portion of what your earn. A wise old woman once said that “one sure way of not going hungry tomorrow is to retain a portion of what you have today.” That wisdom is applicable today as it was during the days of my grandparents. By saving a portion of what you earn, you gradually build up a financial base upon which greater wealth can be built. However, it requires sacrifice and discipline but it sure is achievable and it comes with good rewards. So, as you budget for other things, be sure to budget a portion of what you earn towards your savings.
Invest What You Save. Once you have built up a pool of retained funds by saving a portion of what you earn, let that saved up money start to work for you and, remember to reinvest what it earns you (profit or interest – depending on what your investment product you choose). However, be careful not to invest hastily. Seek the advice of an investment advisor if required.
Pay off Your Debt. Once you have gained mastery over your expenses and are able to grow your savings and investments, a smart move would be to pay-off any outstanding debt. Debt is a burden. It threatens your financial freedom. Free yourself of unnecessary debt. Besides, paying off your debt improves your credit rating which attests to the fact that you are creditworthy and opens up access to more funds. Ultimately, paying off any debt makes you will feel much better about yourself and your financial situation.
For many, the tips above may appear clichéd. However, truth remains that those who have consistently applied them have recorded sustained financial growth and attained mastery over their finances.
I wish you good success.
Author: Adebowale Atobatele
General Manager at Dun & Bradstreet Credit Bureau Tanzania Limited