What does rich mean to you?
First and foremost you must decide what being rich means to you? And become a conscious spender who prioritizes. It’s 100% OK to spend unapologetically on the things you like as long as you cut down costs on other stuff you do not need, even Mike Tyson who had hundreds of millions was in financial trouble because he didn’t spend consciously. Being rich is not the solution, managing your finances is what stabilizes your growth.
It’s all too easy to get lost and try to mindlessly keep up with your friends, it can be a full time job in itself. But you must remember that this always is a trade-off, may be you are able to pick that house that costs Rs. 10,00,000 or more, but you need to sacrifice on the new car you wanted, you cant have both as it will put you in a financially vulnerable position. Take Manisha as an example, she spends Rs. 60000 a year on her shiny shoes with Rs. 5,00,000 take-home salary per year. Do you think that she has control over her personal finances and that she is on a path to an early retirement? Yes! — because she shares an apartment with a friend and she uses public transport, she can afford to spend lavishly on what she likes and still be on her way to financial success. She already has savings since 8 years which puts her in a position where she can spend that kind of money. There is power to say no to things that we do not like or need. And there is even more power in saying yes do the things that we love.
Beware the minutia
Benjamin Franklin famously said “don’t put off until tomorrow what you can do today” do you know what is the single most important thing to get rich? Starting early!
Surely the best time for us to start was 10 years ago for most of us. But you know what? The second best time is today! For example, here is something that you can probably do today. Set up an online account with no fees no restrictions on withdrawal and a high interest rate. Simply Google “high interest rates savings account”, but here is where a lot of skeptics and procrastinators stop “how can I know that this is the account that gives the highest interest rate?” This is just an excuse to not get started. More is lost from indecisions than mediocre decisions. There is something called the 85% solution, it is rather good to have 85% right in doing things than doing nothing at all.
Another excuse is “I only have Rs.2000 why should I put it in the bank account to get only very little interest money?” It is important to note is that no amount is too small when you are forming great money habits. In fact at the perfect time to start is right now because the stakes are low, and the nature is trying to teach us something about finance as well with the virus situation. For example a small newly formed musical band should go on small gigs in pubs in Thamel and get paid rather than just dreaming of playing for a full audience in Dashrath Stadium. It should view it as an opportunity to practice and get better. Likewise you can’t expect to handle crores of rupees well if you’re struggling with thousands and lakhs.
Beware the minutia you don’t have to get it perfectly right the first time, but you must start at some point, and today is a great time for that!
Swap your attention to micro from macro
Have you ever heard of this before? “save on your coffee”, “get to another bank which gives you an extra 0.1% interest rate” ,“save your offers and coupons”, “you should definitely check out this Buy 1 Get 1 Free offer in Bhatbhateni Supermarket”, these examples represents micro decisions. This is not where the battle is won. We should focus our energy on 5 to 10 things that really matter. That will yield exceptional results on invested energy. Here are the big wins:
· Automating your money system
· Keeping a great credit score
· Using debit cards to get free cash backs and rewards (if you have a steady income to pay it back)
· Contributing to Provident funds
· Paying up your credit card debt if you have one
· Focus on your problem area rather than cutting costs little bit of here and there
· Negotiating a raise
· Doing freelance work
· Buying a house that you can afford
· Buying a vehicle that you can afford, maybe it’s a bicycle, motorbike or a car and focus on total cost of ownership rather than the price tag
· Allocating your capital right
Follow all the above things and you can buy as much café lattes you want. To know more about climbing the financial ladder, here.
Set up your automatic money system
We humans are weak at times. We get distracted, bored, unmotivated etc. Which are dangerous in prior investing methods and saving habits . You think you’re motivated but two weeks later you are back again watching cat videos on YouTube. Therefore we need to set up our automatic money system to save us from our worst self. This system will make sure that we stick to our long-term money plan by allocating our income each month for us. Creating an automated money system is a way of doing some work right now to reap a lot of benefits for years and years to come.
For this you will need:
· A checking Account: this is where the money goes first, Think of it like a money distribution center. It’s main purpose is to feed your other accounts by appropriate amount through automatic transfers or standing orders for your bills and payments.
· A savings account: this is a parking spot for short term to midterm savings goals. Vacations, weddings gift, diamond ring, Down payment on a house etc. Pick one with no fees no restrictions on with drawl, and a high interest rate.
· A credit card: if you use correctly it works as a short term loan, choose one which gives you a lot of cash back and discounts.
· Retirement account: you can invest on employees provident fund, citizen investment trust add other private retirement accounts.
· And investment account: you can use one to invest money on capital markets through your broker in Nepal Stock Exchange
2. Conscious spending plan: it contains four buckets
What percentage of your take-home pay should these represent?
· Fixed costs — 50–60%
· Investments — 10%
· Savings — 20%
· Guilt free spending –10–20%
Here is how you can follow such a spending plan:
Don’t go lower than five 10% on saving and 10% on investment because these two buckets will be the new backbone of your new rich life. However, if you implement a few of the big wins from Takeaway number three you will be able to raise these percentages in no time. If we never see it we never get the urge to spend it.
There is a famous quote by a man “I am one step away from being rich, all I need now is money” — person with wrong attitude.
You are few steps away from being rich, all you need is to find your happiness, get motivated and persevere with determination, not one can stop you from getting where you want to be!