Acknowledge
The current pandemic has had an unprecedented impact on humanity; we all need to acknowledge and accept this fact. This impact is far-reaching and profound; it has caused us all to change our normal life in some way or the other. We cannot alter the sequence of events that caused this pandemic and its effects, but we surely have control over how we can deal with it. To help respond to this change positively, I have a few rules :
- Don’t blame yourself
- Don’t blame anyone else, Eg. Family, Colleagues, Friends, etc.
- Don’t regret
- Please sit back, analyze your particular situation, and chalk out a plan that’ll help you get through.
Savings
Contrary to popular belief that personal savings are income minus expenditure, I believe personal expense must be income minus saving. In simple terms, what remains after we invest from our monthly income should be our expense budget for the month. Also, regular savings should be a discipline and not a one-off activity. Ultimately the success of saving does not depend on how much you save but on how consistent you are with your saving habit. And its never too late to adopt a saving habit, be it personal or business – I recommend you get into this habit today!
Borrowing
Borrowing or loans are considered as “bad words” in personal finance, but I believe borrowing by itself is not a harmful act, it is the application of this act that makes it good or bad. Let me explain, suppose you borrow to create a positive asset or an additional income stream, then this borrowing is an asset and not a liability. The positive asset could include – real estate, child education, business expansion, etc. On the other hand, if you borrow to spend on just wants, such as shopping, holidays, or other depreciating assets, it will lead to erosion in your finances.
The most crucial factor of borrowing is your ability to pay back even if your intent is right; if you don’t have clarity on how you will pay back, you must not borrow.
While borrowing, you must be sure about your sources of income that will allow you to pay back on time and not cause unnecessary anxieties.
Secondary Income
It always helps to have a backup, in case of personal finances having a backup helps create cash surplus. If you are a salaried person, never be satisfied by your salary alone, work on ways that will allow you to have a secondary source of income. In my opinion, one must have a minimum of two sources of revenue; this will help you hedge yourself in case of a job loss or delay in salary. Your secondary income streams could be incentive earnings, rentals, performance bonuses, etc.
In the case of those in business, never rely on one industry, product line or market or clientele. It would help if you diversified to hedge yourself in a down market.
My tip is not one unit, ie. Industry, market, or product should be more than 50% of your total revenue; if it is, its time to draw up a new business plan!
Investment
While saving is a critical habit, it alone cannot create wealth. A regular investment habit must supplement it. Contrary to the popular belief that one needs to invest early to create wealth, I’d say its never too late to start investing. Compared to yesterday, today is late, but compared to tomorrow, today is early – so start investing TODAY!
In my experience, I have seen people find multiple reasons to defer their investment decisions. But, they don’t realize every day gone by is an opportunity wasted to create wealth. Once invested, your money does not understand Sunday or bank holiday; it continues to work for you to create wealth.
I am a firm believer in investing in properties, as I have successfully created wealth for myself and my family by investing in real estate. Smart investors don’t wait to buy properties; they buy properties and wait to grow!
Finally, to sum it up – savings, borrowing, multiple sources of income are only sources of revenue. They must be regularly invested in assets like real estate to help create wealth and live a happy life!
The two critical factors to your personal finance are “planning” and “today.” After all, no one plans to fail; we all fail to plan. To begin your financial planning, and the best time to do so is TODAY!
I hope you liked this article, please feel free to share your feedback in the comments below. For more such articles, please visit www.geethanagu.com. Until next good luck and happy wealth building!