Let’s be real, money can be overwhelming, period. Add to that a society built on consumerism, aesthetics, and status (Instagram can literally target you based on your conversations) and you have a recipe for anxiety. It seems like we’re all working harder and harder just to live and to be honest, financial independence can seem like a pipe dream to many of us. While getting there isn’t always easy, it is possible.
Building wealth and getting clarity around your finances doesn’t have to be daunting or stressful. In fact, with the right practices instilled, it can be liberating.
If you want to be one of them, then read on to educate yourself about debt, value-based spending, the best saving habits, financial freedom, and the key components that lead to financial success. It won’t be easy to implement these new habits, but you certainly won’t regret it.
ONE- Pay Off Your Debts.
Not all debts are bad. Debt with a plan can actually be really good for acquiring assets. These are ‘good debts’ as they are spent on investments and assets that are valuable and can be liquidated in the long run.
‘Bad debts’ are those debts you use on consumption.
When you have a million naira personal income and you have a debt of 500 thousand naira that is due or will be due, it is advisable you pay off your debts first before you calculate how much you really own.
If you have more than one debt, pay off the one with the highest interest rates or the one with the highest balance first.
TWO – Determine Your Priorities.
When you prioritize debt, think about high interest versus low interest. You can build emergency funds simultaneously while paying off your debts because if you do not have an emergency fund, you may slip back into that debt if real emergency happens.
Being in debt is stressful so you will feel more compelled to rid yourself of that burden. High-interest debt steals from your wealth; values-based spending helps you get in alignment with building wealth, and an emergency fund protects your wealth so that you don’t slide back into high-interest debt.
THREE- Practice Value-Based Spending.
The first step is awareness – know what you’re spending.
Look back at the last three to six months of your spending and analyze how much you’re spending on your lifestyle.
It is easy to often assume that you are just paying for rent and food but our brains want to rationalize that we’re on our best behavior, so it doesn’t allow us to think about all of the subscription boxes.
Value-based spending is a lot easier than budgeting. Setting a budget can feel restrictive, like being on a diet.
You spend within your budget for a week and then you see that dress on Instagram and you click.
But if you have values, you will see that that instant gratification won’t be gratifying for long because it’s not aligned with our values. Once you determine three values that really matter to you, you’ll find that they can function as a filter. An example would be equity, family, and leverage (when you’re willing to spend money on things that help make life easier). Buying the shoes doesn’t align with any of those pillars, so it needs to be a preplanned choice.
FOUR – Open a High-Yield Savings Account.
Saving is the inverse of spending. Parkinson’s law states that work expands to fill the time available for its completion. Basically, any one thing can shrink or contract to the size of its container. In relation to money in a bank account, the reason you end up spending what you should be saving is that it’s right there, visible, in your checking account.
Open a high-yield savings account and automate transfers on a monthly basis. That recurring act will give you accessibility to only what you should be spending.
Consider investments as well, but make your research so you are investing in what you are knowledgeable about.
FIVE – Understand the Definition of Financial Freedom.
Financial freedom is an equation: enough passive income to outpace your expenses. When you have financial freedom in your life, work becomes an option instead of an obligation.
Financial freedom allows you to enjoy your wealth because time is no longer a finite resource.
When you go to work, even as an entrepreneur, you are trading time for money. But, if you can buy assets to create additional income, then you are trading money for assets that bring you more money.
If you get on this train and educate yourself, you will find that you don’t always have to rely on yourself and your body to make money. It takes a lot of time, effort, and sacrifice to get up every morning and go to work.
SIX – Instill the Key Components That Lead to Financial Success.
Six qualities that every wealthy woman should try to encompass:
- Planning: Determine your financial goals, write them down, and find an accountability partner. You can’t get what you want if you don’t plan for it. When it comes to money, you have to be goal-oriented.
- Frugality or Intentionality: Commit to saving more, spending less, and sticking to a plan. This formula leads to an ability to have a passive income because if you spend all of your money then there will be nothing left to invest it.
- Confidence: In order to gain financial confidence in managing your money and investing, you need financial education. We didn’t learn this in school. You have to go and find it, otherwise, you will stay in a state of stress. Inaction is terrible for your finances.
- Responsibility: Accept your role in financial outcomes and take action to make financial changes in your life.
- Focus: See your process through to completion one step at a time. Accountability is crucial.
- Social indifference: Don’t succumb to buying the latest thing as a means of feeling good. If you practice this, it will change your life. Women are the targets of consumerism. But, if you appreciate how you look and how you are inherent, you will save yourself a lot of time, money, and energy.