As you start thinking about your goals for 2019, I would like to recommend adding "cultivating good money habits" to your list. On our continuous quest to become financially independent and grow our wealth, we need to learn and practice money habits that support our mission.
This blog post continues the Her Finances series. Explore ten simple good money habits and how you can start making them yours today. While you read, select a few habits and write down how you plan to make them happen in 2019.
#1: Live within your means
This is an essential financial habit that you need. If you pick only one from the list, let it be this one. Your journey to financial independence starts with respect for your money and making wise money decisions.
#2: Know your financial status
Knowledge is power when it comes to your financial situation. It is essential to know where you stand financially. Sometimes it seems more comfortable not to know. However, if you want to see the positive change, you need to get comfortable with knowing your real financial status.
#3: Talk about money
Being open about your financial status and challenges is very crucial to take charge of your finances. We have been trained to treat finances like a taboo topic, and this is hindering our financial growth and freedom. Sharing money experiences and learnings with your trusted friends and family unlocks many benefits.
#4: Have a financial plan
Until a few years ago, I never really understood what a financial plan was. Having a plan for what I wanted to do with my money and how my money will work for me was a very foreign concept. Writing down the things you want to be able to do like get out of debt, buy a house, retire comfortably, save or pay for education provides you with a clear view of what you are working towards financially.
#5: Find ways to save money
As part of your monthly budget reviews look for areas where you could potentially be saving a little more money. I am living proof that saving money can be more fun than spending money. Watching your savings grow can be very rewarding.
#6: Get expert help
You don't have to go through your financial challenges and growth alone. There are professionals out there who can provide guidance and share knowledge on how you can achieve your financial goals more efficiently.
#7: Grow your money
Looking for ways to increase your current income, create new income streams or invest your money should also be on your list. Building wealth is one area we need to explore more on our financial journey.
#8: Be financially literate
Yes, we need to be financially literate. There are so many things to learn about finances. Be on a mission to learn about different aspects of money. Somehow we are willing to bridge our knowledge gaps on almost every other topic, but we neglect our financial literacy.
#9: Surround yourself with "good money" people
Being in an environment of people who save and are responsible with their money is a great way to stay on track. Surrounding yourself with this group of people will offer you great learning opportunities and experiences that help you achieve your money goals.
#10: Invest in yourself
Prioritize investing in opportunities that will help you get to the next level on your journey. Your personal growth is the best investment opportunity that will bring you the most return. We need to invest more in ourselves to get the results we want.
“Enrich your financial portfolio with your savings” - MC
Moving on to the next chapter of the Her Finances series – How to grow your Savings.
On my journey to Financial Independence, I learned the benefits of being disciplined in my savings. You might ask, have you always been successful? My honest response is, I have been 90% successful. The exceptions have been when I was going through transitions and had no income.
With this blog post, I want to encourage you in every phase of your saving journey. It's an achievement to get started and an even more significant achievement to power through the learning phases.
Benefits of growing your Savings
To motivate you more, here are some compelling reasons why we should grow our savings:
My saving journey - First memory & learning to save
My earliest memory of saving was when my mum opened Savings accounts for my sister and me at the age of three. I was so proud to save my money. Sadly life happened, and I wasn't able to continue my saving journey until I started my business at age 13 and started saving my profits. The seed of saving was planted and would later grow in high school. My friends and I replicated something we watched our mothers do. It was a saving system where we pulled money together to get larger sums. Each month, we pulled our money together, and one of us will take the bulk sum. We rotated until everyone got her chance to get the big sum. Continuing my saving journey, when I moved to Germany, I opened a fixed savings account where I saved fifty euros monthly. I remember having to squeeze fifty Euros. I had small beginnings to the saving discipline I have today. Today i am able to save about 25% of my income monthly.
My Top 5 Saving Tips
The five best practices below have helped me grow my savings over the past fifteen years.
Make your savings a priority
Your attitude towards saving should be to pay yourself first. Take out your savings before you start spending your money. If your savings are the last thing you take out monthly, it will never happen.
Take the first step
Start with whatever amount you can afford today. It is crucial to see your savings as a journey. It is not one and done; it is continuous. Increase your Savings when your income increases. Every time I get a salary raise, I increase my savings. I see more income as an opportunity to be more financially secure not spend more.
Make monthly payments to your savings account. I have had excellent results with transferring a fixed amount into my savings account on the same day of every month. The routine helps saving become second nature.
Always save, no matter what. It is very easy to stop saving when things get tough. Set rules for when it is OK to change course or take money out. I only take money out of my savings to invest in learning, pay for periodic bigger bills and the things I saved for.
Set savings goals and work towards them
Plan your savings and define the goals you want to meet. Remember to set a timeline to achieve your goals. It's gratifying to reach your saving goals. When we set goals and track our progress, we increase our success rate. Suddenly something that feels like a punishment serves a purpose and becomes a little more exciting.
Learn, adjust and pivot
It's a journey, be ready to learn and make changes. Get to know what works best for you. Don't be discouraged when things don't go as planned. Keep learning, try new techniques and get the support you need. There are many useful resources to help you grow your savings, see some listed below.
Continuing the Her Finances series, let's get personal and talk about your relationship with money. Do you feel stressed when you think about your finances? You are not alone. Concerns about bills and expenses emerge as a top source of stress among most groups of women (Source: National Survey). It is crucial to develop a healthy and positive relationship with money to attract more of it.
In this blog post, I will share some insights on creating a healthy relationship with your money. Starting with my relationship with money and then five ways you can develop a healthy relationship with money.
What is your relationship with money?
What are the first three words that come to your mind when you think about money? Write them down.
The three words I think about with regards to money are Opportunity, Multiplying, and Gratitude.
What type of relationship should we have with money?
At a financial workshop I attended recently, women shared the words they associated with money. Most of the words shared were slightly negative. It proved the case that most women have a negative relationship with money.
To create, grow, and keep wealth, you need to have a healthy relationship with it and an action plan (Source: Is Your Relationship with Money Healthy?). I am on a mission to help women like me have a more positive relationship with money. Remember the three words you associate with money; we want them to be positive.
My relationship with money
Let me begin by sharing my relationship with money using some reflective points:
My earliest memories
In Nigeria, it was customary to give money as gifts to children during holidays and birthday celebrations. I remember when family members gave me money, I thought I could buy everything I needed. I enjoyed looking at my money and planning what I could buy with the money I got.
Making my own money
To grow my "pocket money" at age thirteen, I started my first small business where I sold a homemade Nigerian beverage - Zobo. I learned the art of growing your money from the women in my life. Being resourceful and creating financial opportunities was promoted in my extended family.
Learning do's and don'ts
I learned a lot of lessons about money by observing people around me. It has always been important to me not to repeat the mistakes I saw. I wanted to be financially independent, have enough and be able to share my money. Though the financial behaviors I observed growing up informed my money journey, I am redefining my relationship with money.
From not having enough to sufficient
Growing up, we did not have free access to everything we needed. My relationship with money progressed from the fear of not having enough to being comfortable in having what I needed. Overcoming my fear of being broke has been an essential step for me on my money journey. I know now that fear of being broke and being responsible with money are not the same thing.
Learning to be financially responsible
After I became financially independent, I quickly learned that the decisions I make with regards to my money have significant consequences. Especially as more money became available to me, I had to keep reminding myself of my small beginnings and the fact that I needed to be responsible. My decision to grow my savings instead of spending too much of material things has helped me get to a place of abundance.
5 ways to develop a healthy relationship with money
If you have an unhealthy relationship with money, you will never create the abundance you wish you had. (Source: Your Relationship with Money: 11 Ways To Make It Healthy). Here are some ways to develop a healthier relationship with money.
Be more aware
In any healthy relationship, you strive to be more aware of your actions and how they affect the other party in the relationship. It should be the same with your money. Start by unpacking how you feel about money, then list your strengths with money as well as your weaknesses with money. From today, pay attention to what you are doing with your money and how you are treating your money.
Have money goals
When we have goals we are working towards, we tend to spend time and focus to achieve them. It is essential to have money goals that you are working towards always.
Talk about money
The more we talk about money, the more we comfortable we get with it. People around you have valuable money do's and don’ts that they can share with you. Talking about money empowers you.
Learn from your money mistakes
I am a firm believer that there are lessons to be learned from the mistakes we make. Actively work to get out of the bad place you might be now because of debt or harmful spending habits. The success you achieve will fuel your future positive relationship with money.
Be financially literate
To develop a healthy relationship with money, spend time educating yourself. Learn about ways to create, grow and maintain your wealth. There are many interesting resources out there that can help you on your journey. Read books, take classes, talk to professionals, do everything you can to learn more about your money.
Do you have a financial plan?
Recently at an event I attended, I heard a scary statistic - "20% percent of women are comfortable with their financial knowledge. The number is low because they lack planning or fail to take action" (Source: 2015 Insurance Barometer Study). The good news is "Women are eager for information about financial planning and investing - 92% of women want to learn more about financial planning" (Source: Money fit women study).
Continuing the "Her Finances" series, let’s discuss a tool that will help us take control of our finances and achieve our financial goals- Financial planning. In this post, I will focus on what a financial plan is, how to create your financial plan, the continuous process of financial planning and share some resources for additional research.
I encourage you to say the following about your financial journey:
What is Financial Planning?
There are many definitions of financial planning. Here are some that I liked:
Why do you need a financial plan?
Creating and managing your financial plan has many benefits. A financial plan will help you:
My financial planning journey
Until about three years ago my financial planning was focused primarily on growing my emergency fund and my savings. I set goals that I wanted to achieve and worked towards them. My commitment made me very successful in achieving my saving goals.
With my move to the US in 2015, I began to re-evaluate my financial goals, get exposure to other options and widen my perspective on financial planning. I updated my financial plan and started educating myself on different ways to achieve my financial goals. A few new areas I discovered were saving for retirement and investing in stocks. I am looking forward to exploring more areas as I learn more.
Six simple steps to start your financial planning
Step 1: Know your current financial situation
Start by being very transparent about your current financial situation. Before you begin setting your goals, you need to take stock of where you are today. Knowing your financial status will help you establish your starting point and set you up for success. Include your income, debt, current savings as well as other financial commitments.
Step 2: Define your financial goals
What are your financial goals? To be successful, you need to know what you are working towards. In my research on financial planning, I found the following essential categories: Savings, Debt, Emergency Fund, Investments, and Retirements.
Step 3: Create a financial plan
Like with everything we want to take control of, we need a plan. A financial plan helps you achieve your financial goals more efficiently. Set target dates and milestones to achieve your goals.
For example, if your goal is saving up $12,000 for a down payment on a house. You want to be clear on how much you can save monthly and how long it will take you to save up to your goal.
You want to be able to have a clear answer to the question: What can I do today to achieve my financial goals?
Step 4: Start implementing your plan
Now that you have a plan; it is time to take the first step and start working towards your plan. Practice being disciplined and staying committed to your plan.
Step 5: Track your progress
At all times, you want to be able to answer the question - How close are you to achieving your financial goals? Knowing where you are will either confirm that your plan is working or highlight areas you might need to change. Regularly measure the progress you are making towards achieving your financial goals. Seeing progress will encourage you to continue your journey.
Step 6: Review and adapt your plan
I recommend at least a monthly review of your plan. As we go through life, changes to your financial plan will be required. You create your plan based on some assumptions if they change you want to ensure your plan matches your learning. Plans are living documents, feel free to update.
Call to Action: Start creating your financial plan
Every woman needs to be the steward of her finances.
OK, I know that finances are not something you talk about often and with any joy. However, finances are too important to not be discussed or ignored. I encourage you to start talking about your finances and start being in charge.
In this post, I will focus on key aspects that help you take charge of your finances: changing your relationship with money, having clarity on your financial status and managing your finances with the help of a budget.
I'm speaking from my own experience and hope to support your journey to financial success. As a university student struggling to make ends meet, I decided to take charge and manage my finances to ensure I was fully aware of my financial status. It wasn't an easy journey, but it was totally worth it.
What is your relationship with money?
Many women I speak to have an interesting relationship with money – and by “interesting relationship” I really mean no relationship. I typically hear the following when finances are a topic of discussion "I don't talk about money," "my husband oversees the money," " I don't know my financial status", "I don't have enough money to budget", etc. The overall attitude towards finances is typically passive and fearful. We need to change our attitude towards money – be positive and active. In the steps outlined below, we are working under the strong assumption that you are living within your means.
How can you take charge of your finances?
Step 1: Change your perspective on financial matters.
You need to see your finances as an area in your life that you control and not one that controls you. Changing your perspective is a journey, it takes continuous effort and time. I am living proof that it is attainable. I see finances as something I am comfortable with. I believe that finances are good and I’m in control
Step 2: Take stock of your financial status
Firstly, for this exercise to be beneficial, be fully honest with yourself. List out all your expenditures in a month and your monthly income from all sources. Caution: the result of this exercise might be scary. At the end of this exercise, there should be no unknowns where your finances are concerned. The first time I did this exercise, I saw where I was lacking financially and gained insight on where my money was going each month
Step 3: Create a budget
I often ask my friends and family if they have monthly budgets. Their responses are very shocking – about 95% of them didn't have budgets. If you don't have a budget, create one now. It is very simple. Create a tabular version of your income and expenditures you discovered in Step 2. See the simple examples in the Tools section below.
Bonus tip: Add savings as a line item in your budget. This is the foundation for growing your savings – the key to building financial freedom.
Step 4: Review your financial status regularly
On a regular basis you want to ask yourself: How am I doing financially? I encourage you to review your budget at least once every month. I review my finances twice monthly following my salary schedule. In your monthly review, you should do the following: add any surprise costs you didn't budget for, add missing reoccurring expenditures, add additional income and celebrate your progress
In a series of blog posts titled “Her Finances”, I will be sharing personal finance tips and experiences geared toward women, a subject I am passionate about. In the next post of the "Her Finances" blog series, we will discuss the power of saving and how to start saving money.
• Adopt a healthy attitude towards money: Use it mindfully and think about the long-term
• Actively manage your finances: You need to be in control
• Guard your finances vigilantly against external forces: Don’t let other’s control your finances
• Take stock at the end of every month: Know your financial status monthly
• Adapt to life-changing situations: There will be changes that affect your finance. Adapt your plans accordingly
Tools: Monthly and Yearly Budget