Taking Charge of Your Financial Future

Many discussions on how to take charge of money and plan well for the future are geared at younger men and women. This is a good thing as it allows them to set the right groundwork for a secure financial future. But what happens if you weren’t able to do this when you were younger and now you face the prospect of being broke in your old age with no help in sight? It can be isolating and embarrassing thinking that you could have done better and you are the only one who didn’t plan properly. It is not too late to take charge of your finances. There is hope and it can be done.

Added to this, you are probably the only one responsible for the financial well being of not only yourself but your children, parents and extended family members, especially as there are cultural and societal expectations that we are to help our families, even if we are giving money we can’t afford to give. However, you need to help yourself before you can help others financially. As they say at the start of every flight, “put on your own oxygen mask before helping others with theirs”.

Practically, there are a number of things we can do to start creating financial stability. We start this by being honest. This honesty requires you to look at your current financial situation clearly and without judgment. This is a place where we see what you are currently earning, how much you are spending, what you need to spend in the future and what you need to put away for your future.

Let’s break that down into simple actions:

No new debts: If you currently have credit cards or debt, please don’t add any more. To live a wealthy, less stressful life, you need to limit the amount of debt you carry. While many of us do have mortgages or car loans, using borrowing as a stop gap to deal with not having enough money to pay your monthly bills is not a good idea. Doing this makes it difficult
for you to plan or even work towards financial independence. Debt is not a piggy bank, it’s not a healthy place to dip in when we are short of funds. It costs money to borrow money and the true cost of the items you bought on credit can double or triple depending on how long it takes you to pay off the credit card bill.

While it is true that banks and loan companies use credit reports as a quick way to assess how creditworthy you are, if you build up a substantial down payment, you can negotiate better terms with the seller. Did you know that some people who earn good money, don’t have debts and pay cash for most things can have “poor” credit ratings? Would you rather be a person who has substantial savings and investment that is yielding interest and be thought of as a “poor” credit risk or a person who is living month to month, paying the minimum balance on credit cards but beconsidered a “great” credit risk?

Know what is coming in and what is going out
As much as we don’t want to face the reality of our money situations, it is important that we know where we are and what is going on. Knowledge is power; once you know what’s happening, you can take steps to make the necessary changes to put you in a better financial position.

The first thing is to identify all the income coming in every month; then using your bank statements as a starting point, identify and calculate all the things you pay for. List the things that you will need to pay for in the future, such as school fees, that don’t occur as monthly charges. As you look through all the things you are paying for, start to identify the ones that aren’t essential. Essential things will be rent or mortgage, taxes, medicines, transportation, groceries, school fees/uniform etc.

Think and eliminate wisely. If you are paying rent, can you move to a cheaper place that’s still safe and in a location you want? The same goes for your housekeeping expenses; are there ways that you can pay less for household supplies? One other thing, please consider taking out health insurance. Many of us think insurance is money going down the drain but it truly isn’t. God forbid that a medical emergency comes up, procedures are rarely cheap and thinking of how to pay these bills while trying to recover from an illness is not great for anyone.

Have a plan
It makes sense that in order to know where you want to be financially, you need to have a plan to get there. Your destination or goal may be paying your children’s tuition for university or to be able to earn enough interest from your investments to live on. This plan is then broken down into smaller, manageable actions. Going back to the tuition example, you know how much the bill will be and when it will be due. One way to meet that goal is to start putting away fixed amounts every month that will total the amount needed by the due date.
The beauty of doing this is that if it becomes obvious you are struggling to make the monthly savings from your current income, you can start making changes by either finding extra sources of income or reducing expenses. You are no longer helpless because you have a plan.

You have to compromise
One of the problems we all have is, we don’t want to make adjustments to our lives because we don’t want others to judge us however, we owe it to ourselves to live truly honest lives that make us happy and content. You don’t have to attend every party you are invited to ¬ especially if the party includes the inevitable “aso-ebi” (a fabric purchased at a price from the host and worn on the day of the function by those attending the party to identify with the host) and a gift.
Sometimes, we need to say “no” because we have a greater goal in sight. The money going to the “aso-ebi” is money that can go into your retirement fund and earn extra money to boot. Decide what is important to you, financial security or keeping up with the party crowd.

Ask for help
There is no shame in asking for help. We think it is a sign of weakness to admit we are struggling financially. But please remember, very few of us were taught about money management and we had to stumble along making mistakes and praying that our mistakes weren’t too damaging. If you are in debt, there are many organisations that can help for free. Be honest about your situation and they are more likely to help find a suitable resolution to your debt problems. If you need to find a way to make extra money, tell the people you know. They may know of opportunities available that can help you but, they can’t help unless you ask.

Tope Shonekan runs a practice helping her clients grow wealth and become
financially independent. She also works as a Case Manager with Crosslight Advice, a debt advice charity in London. She can be reached on tope@money¬dialogue.co.uk