We all want financial freedom. The idea of waking up and not worrying about money is the ultimate dream. And the sooner we get there, the better.
Unfortunately, not many people live to achieve it. The unpredictable economy, increasing debt, financial emergencies, and all the other issues brought about by ‘life’- like the pandemic - can overturn our plans and poke holes in our financial goals, rendering them useless.
Trouble happens to everyone. However, in this jungle called life, the better-prepared people have a higher chance of surviving than those who are not.
For example, have you ever heard of stories of very ordinary people with average income achieving great financial success faster than those with above-average income? For instance, I know of a ‘smokie joint’ guy who just finished paying off a plot in a prime location and is now in the process of completing his residential house plans.
And no! It’s not through magic. Through sheer determination, bullet-proof planning, and a concrete strategy, he was able to achieve this feat. It is through him knowing exactly what he wants to achieve and working hard to achieve it with unfettered focus.
And as they say, a new year offers a new start. So, as we prepare to begin a new year, here is a cheat sheet with a handful of very smart strategies that will help you along the way to achieving your financial success in the year 2022.
Before we even get into the serious stuff, it is crucial to remind you that protecting your ability to earn an income is paramount. Get rid of anything that might derail or stop you from getting an income.
If you have an 8-5, ensure you do all it takes to stay employed. If you have a retail shop, ensure that you have all the necessary legal requirements and keep all debt under control to keep debt collectors at bay. If you are a service provider, ensure that your skills are up to date always. Invest in yourself.
In addition, find ways to supplement the income. Not only does an extra income stream help you pay the bills and eliminate debt faster, but it helps you stay safe if one of them dries up.
Remember to make your health a priority since it could be one major thing that can not only reduce your ability to earn but could eat into your savings - get regular checkups as recommended, pay your NHIF contributions, get additional insurance cover if you can, take all the relevant precautions.
I recently found a handy trick that has helped me stop overspending on unnecessary things. Take your monthly income and split it into hourly income.
For example, if you earn a net of Ksh80,000 from your 8-5, then you earn about Ksh500 an hour. Now, let's say you saw the perfect handbag online, worth Ksh7,500.
That means you would need to work a total of 15 hours to afford that handbag. Now ask yourself if you would happily trade 15 hours of your life for that handbag. Is it worth it?
Overspending on unnecessary consumption goods is the #1 enemy of our financial journey. So do better. Evaluate your priorities carefully and give up excessive spending that might be holding you back from achieving more on your financial journey.
This can never be said enough. A healthy emergency fund is as crucial as a healthy income - one without the other is the same as a vehicle without breaks.
An emergency fund cushions you from tumbling off the rails when life hits you in the face - therefore allowing you to maintain your financial momentum even amid a financial crisis. If you don't have a financial cushion to fall back on, it could force you into debt and take years or decades to recover.
So if you do not have an emergency fund already, put it on the priority list and create one this coming year. Remember that an emergency fund is not savings, nor is it an investment. It is simply money set aside for any unexpected situation.
That said, you can grow it rather than let it stay idle in a current account. Consider putting your emergency fund in a high-yield savings account that is also flexible enough to withdraw promptly whenever the amount is needed.
What is likely to happen when you shift your focus to something else while driving? You are likely to get into an accident, right?
This is the same with your financial goals. If you want to get to your destination safely and successfully, you can not divert your attention from the purpose. If you don’t set and focus on clear financial goals, there will be a million other things to spend your money on.
You know, like that overdue trip to Dubai with the girls! Or maybe that expensive watch that you just can’t get out of your head! Focusing on what you want to achieve financially keeps your head level and away from all the FOMO temptations.
The other main enemy to financial success is unplanned borrowing. There is good debt and bad debt. Good debt is great and can even help you reach your financial goals faster. However, bad debt does the exact opposite.
If you accumulate bad debts, you will spend most of your income servicing the loans instead of putting them into good use to help you reach your financial goals.
Sometimes it will look like the journey is painfully slow. You will wonder why you should keep saving and investing when the fruits of all that seem so far away. You will feel powerless.
But do not let that deter you from your purpose. Instead, turn your attention and energy to other productive things that will help you reach your goals faster. For example, instead of focusing on the numbers on your account and wondering when you will reach a six-figure, apply that same focus on raising more income so you can top up the account faster.
Not many people will support you on your journey to success. You are actually lucky if you have more than a few people on your support system who are in favor of you succeeding financially.
But do not let that deter you from your journey. Ignore all those who do not support you. In fact, avoid hanging out with people who bring a negative vibe to the whole financial journey. Those friends who tell you that your dreams are too big and you are better off just spending your money on road trips are not worth keeping.
Instead, spend more time with encouraging people who genuinely want you to achieve your goals. You'll be glad you did.
All said and done; it all depends on how determined you are about reaching those goals. There is no guide that can magically make you successful without your own inner determination and the hunger to succeed.
And this determination is not plainly the desire for success, but a relialisation of you may need to learn, setting time-bound goals with milestones and actually practicing what you have learned.
To a more financially successful 2022!