“Ah! When I am 30, I will totally be retired.”

At least that’s what I thought. Today is my 30th Birthday and I have A LOT to reflect on.

When I was younger I thought that by the time I am 30, I will have a successful business and won’t have to work another day of my life.

Bahahahahahahaha! Allow me to laugh at my naive 14-year-old self while I fall over the chair.

Don’t get me wrong, I did work hard towards this goal but as time passed I rapidly came to the conclusion that life doesn’t always turn out the way we want. In fact, you don’t always get what you want; or, even ever know exactly what you want for the rest of your life. One thing remains true though: We need the courage to take risks and see where things go.

I learned earlier on that being in control of your money and having money stashed away helps smooth the ride of life. It helps us take risks when we want to and rescues us from unforeseen situations. My 20’s have been interesting as I spent most of my time, mastering money and sharing my technical knowledge of it – How to invest, what to invest in, how to think about money, what to use it for, and also making mistakes of my own.

Here are the 16 life-changing business, money and life lessons I have learned in 30 years and how they can help you too.

1. An ‘escape fund’ is the key to freedom 

More commonly known as the F**K Off Fund, it’s used when you want to escape.

Many of us find ourselves questioning the path we have chosen, the choices we make and what we want from life. You see senior people above you at work and you really don’t aspire to be like them. Perhaps deep down, all you want is to follow your passion, start a business and work in your own terms; or, simply wonder when you will have that sabbatical to travel the world.  There you are, no money and you need to live. Having an escape fund is what will give you that freedom.

Those things I wished for, become things I can do. You might be having a happy life and career now, but if things change for the worse, you need a fund to do something about it. I am all about financial security – to have the ability to give a finger to whatever doesn’t float your boat anymore.

My Story: I used my escape fund to start Wealth Architects. I didn’t leave work, I got fired. My work situation was toxic. Constant changes, people being fired. I was really stressed out most of the time, unhappy and burnt out from all the politicking. Luckily, I had been saving for financial independence for a while because I knew that one day I’d need to leave. Now, I get to do what I love and live by my own terms, life is pretty awesome 🙂

2. Being Unapologetically You 

You can’t let other people stop you from getting what you want in life. Own what you want and go after it unapologetically.

I have learned to accept that we live in an imperfect world and therefore, you can control your surroundings and your destiny. The choices we make, lead us onto a path to get to where we want. Make those decisions unapologetically, else you will stray and take even longer to get there.

Choose you and be happy – no need to apologise for that!

3. Educate Yourself 

All the knowledge I have acquired on finance from life, college, books, courses (CFA) and podcasts have been invaluable. It has saved me from the ‘get rich quick’ schemes on countless occasions. In my position in the field of money, a lot of people approach me with all these ‘amazing’ products and having a deep understanding has enabled me to sniff out scams from a mile away.

Once you finally make peace with the fact that it takes time to build wealth and compound interest, you will start making more money than you lose.

4. Life’s a marathon –  slow and steady wins the race 

I have never been one to fear missing out on things.

I am just not built like that and thankfully, it has saved me from temptations to jump onto the latest ‘big thing’ and try to ride every wave upwards as quick as possible (here’s looking at you, bitcoin). Although it is boring, the best way to grow your wealth is investing consistently over time into investments that earn you a favourable return – interest or capital gains.

Nothing beats the power of compounding.

5. Hedge for peace of mind

There are so many sensational headlines that just won’t let you chill – ‘Tax will hurt markets,‘ ‘NSE sheds billion,’ ‘Fortunes in sharp fall!’.

I’ve always been aware of the element of risk in every investment I make and also, understand that risk cannot be eliminated. While that may be true, there is less risk when you spread out your investments rather than placing them all in one basket.

Personally, I like to spread my investments across asset classes. Should the stock market fall, like it has before, I will still have other assets to provide gains. However, if the whole market takes a massive dive, I have enough cash to ride it out while  I figure out how to earn some more money.

6. Cheap isn’t always better, so is expensive 

This is Kenya.

You’ll find yourself buying fake things touted as original/better, and cheap just because it’s cheap and supposedly better.

Just because something is being sold at a discount, doesn’t mean that it’s a good option. That’s why I subscribe to minimalism (rather than frugalism) because it is better to buy less, but focus on quality rather than price.

In the long run, it will be a better option.

7. Lifestyle inflation takes away from your future 

Lifestyle inflation is when you inflate your lifestyle each time you make a little more.

Being tempted to buy nicer things isn’t uncommon, but will surely take away from a better future. Simply don’t engage in things that will kill your ability to save.

To overcome this, you’ll need to take note of any real changes in your budget (i.e. the net effect of the raise – after tax and expenses), value experiences over things and choose to make planned gradual changes to your lifestyle.

8. The friends you keep, matter 

In the last year, I realized that most of my friends are 40 and above. By virtue of my work, they are the people that I have naturally gravitated to by default. These people have taught me so much. I am so grateful.

Since I started this journey back in 2014, I have managed to weed out all the petty bullshit and toxic people, leaving me right where I am now. Happy.

9. Making money isn’t hard

Unfortunately, most of us tell ourselves that making (even keeping) money is hard.  It really isn’t.

Making money is the result of an exchange, not the cause –  provide value and receive value in return. Also, there is no such thing as luck, merely opportunities created.

Changing your conditioning, rewriting your psychological blueprint, bad experiences and their negative biases is the first step to liberation from this mindset. When preparation meets good attitude, it creates an opportunity; where an action that results in making money can be taken.

10. The biggest risk is not taking one 

Although I consider myself naturally risk-averse, I have taken some serious risks in my life.

Quitting my first job was a big risk. Starting my own business was an even bigger risk. Making financial investments that I wasn’t 100% sure would pan out, was another risk. And you know what? With the exception of maybe one (or two, perhaps it was three), they’ve all panned out.

The fear of the unknown keeps people stuck. We always want to know all the risks and have the guarantee that they will all pay off. However, there is really no way of knowing that. Until you realize that, you will remain where you are.

11. There is no single formula for financial success 

I have talked about survivors bias before and it is my firm belief that reading about people who have made, it doesn’t guarantee your own success.

Everyone’s situation is drastically different, particularly when it comes to personal finance (aside from the basic stuff  – saving, retiring, taxes etc). This is why you need to figure out ‘YOU’ – what you value and translate that into your financial life.

12. Perfection will keep you broke

Being an A-type personality, I can be quite obsessive, ergo meticulous with my work. I find myself taking ages to get something done. Guys, perfection will keep you broke. It’s better to be done than perfect.

This is the delicate balance I am still battling with every day.

13. There is a dark side to frugality 

Because I can be quite obsessive, I am very thorough on how I spend and calculate my money.

When it comes to saving, I am always pushing myself to see how much more I can save – trying to squeeze as much as possible, constantly using hacks to get it done.

There were days I didn’t spend anything and it wasn’t hard at all – but over time, I was tired and miserable from restricting myself. All these things, take a great amount of energy and time to play out as it depletes your decision making power. Ironically, after I decided that that policy was for the birds, my month to month spending didn’t change.

14. Spend mindfully 

I’ve had people come up to me and questioned me on how I live or spend my money.

Don’t be swayed by those who love to ‘spend-shame’ so that you can appear to be on the ‘same level’. Everyone has their own opinion about what is good to spend on or waste money on. So don’t cancel on those things you enjoy or buy things that you consider unnecessary in your life. Only spend on things that bring you joy.

Carefully thinking about what you spend on and what it means to you, will naturally save you money.

15. It’s better to be respected than liked

Being a woman, I am culturally conditioned to believe that my value as a women lies in being liked hence, perfectionism, the martyrdom, the doormats, and the underearning.

The truth is, if you want to make money, you need to be respected. You can’t do that by merely being liked by people. Striving to be liked will only ruin the relationships you make because it is difficult to set boundaries and get things done.

One needs to create value, be kind to everyone, deliver above and beyond expectations. I am more focused on that – that is, being respected – above the fickle fleeting feeling of being liked.

16. Finally, sometimes it’s worth to wait 

Society places so much pressure to achieve certain milestones by specific ages. Don’t fall for it. 

You aren’t a failure for doing things a little later in life. Personally, because of my unconventional path in life, I have had to start something(s) later in life. I have taken a lot of flak for it and it has led to many internal battles for several years.

Now, all the chances I took back then, my patience and perseverance are slowly paying off in ways I never even thought possible.  

Before you go…

If you found this helpful, click the share it on your network so your friends can benefit too ?

Image credits:  Top by Pixabay, via Pexels.

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What does your to-do list look like on Monday?

Do you schedule a money date right in there?

Perhaps not.

Perhaps thinking about money on a Monday is mind-numbing and soul-crushing. 

We always tend to dedicate time to other areas of our lives and forget about money. Successful people regularly dedicate their time and energy to plan, manage and budget their finances. Their drive is to empower themselves financially to gain the power to drive their dreams. Ultimately, life isn’t just about to-lists, tasks, work and productivity. There’s more to it. More so about gaining the freedom to do the things we love and be happy. Regardless.

If you are looking for ways to gain financial success by adopting habits from those who have made it, here are 8 habits of financially successful people:

Focused Intent

Many of us get lost chasing multiple goals and end-up chasing nothing, risking health and happiness, or simply being taken for a wild ride to nowhere. Successful people determine their intent early and focus on it with laser-like precision to the point of appearing obsessed. Every decision and action they take is done with this main goal in mind. Intense concentration of nature is what enables them to accomplish what others only dream about. So if your main financial goal is to build a block of flats, every step you take will be to that end.

Spend Time Wisely

Time and money go hand in hand and cannot be looked at exclusively. Successful people understand this and don’t waste time or procrastinate making important financial decisions. Money un-invested loses value with time and increases your chances of not achieving your goals or dreams. Therefore, instead of focusing on how much you earn in a month – focus on how much you earn every hour – how much you would lose by doing something or not doing something.. This will enable you to avoid time sinks (social media, tv, etc.) that many of us engage in on a regular basis.

Make own opportunities

Successful people strive to create their own opportunities by asking questions, taking calculated risks and taking the initiative to build their own success. They understand that it takes money to make money, and thus ensure to make solid investment plans to secure steady wealth flows. Living beneath your means and saving all the time will not be enough, therefore create more opportunities to increase your income. You may decide to invest in real estate or start a profitable business, whatever you do make sure you take the time to research all your possibilities, make calculated and logical decisions.

Test Different Strategies

Testing out different money management strategies and ideas is a great way to learn what works best for you. Ideas are considered the ‘currency of life’ and the more you utilize them, the more you will be amazed quickly you will be able to weed out the bullshit in your life. Businesses ideas and investment ideas need to be tested out in order for the entrepreneur/investor to learn and then, customize. One size doesn’t fit and ultimately, it is better to try and fail than never to have tried at all.

Stay Humble

Never forget your humble beginnings – how much you have sacrificed and strived towards your goals. Regardless of how much money you have made, it could all disappear if you get carried away making unnecessary purchases. Successful people, always keep pushing on. They never lose their drive and the passion that inspired them to take the journey in the first place. As a result, they never stop building and expanding their opportunities to make more.

Take Action

While some people choose to engage in betting and lottery games hoping for a financial miracle, successful people believe in creating their own financial fate. They see more value in talking to a financial advisor, than studying betting statistics. For them, it is important to make the right moves and take steps to ensure their own financial success. 

Own Decisions

Successful investors have a sense of responsibility for the choices they make and own them – they understand that they have a responsibility to :

1. learn from their decisions,

2. understand their decisions and,

3. educate themselves to better shape their savings and investments.

To do so, we must first understand that every decision we make has an opportunity cost attached to it i.e., deciding to pursue further education may mean, postponing buying a home or saving for retirement. Thus shaping our goals in the short-term and long-term, will better shape our decisions today. Having this in mind enables us to take more control over the outcome and exercise discipline not to undo any good achievements.

Be Generous

When you seek to help others, people will be included to return the favour. Life is a giant circle of Karma, thus freely giving your time and money pays back in the best currency possible. After all being financially successful isn’t just about controlling impulses or merely having an abundance of ‘things’.  These things will never give you financial or emotional prosperity you seek.

Final Word

While these habits may increase your chances of financial success, there is still the condition of survivors bias. This is when we make an error in concentrating on people who have made it in the past and overlook those who did not.  Typically because our failures are never publicized. Ultimately, we stand a bigger risk of making false conclusions and copy-pasting the lives of people who have achieved the success we want.

Instead, focus on developing good habits and don’t compare yourself to others on the financial road ahead. The key is to start good habits and set reasonable goals to achieve now, even though modest, base them on ‘me’. In the long haul, financial success will materialize as you will have learned, grown and developed good habits to bring forth financial success.

Image credits: Top, by The Lazy Art Gallary via Pexels.

Other related articles:

• 8 Financial Planning Rules of Thumb You Need To Know
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• Money Habits & Raising Money-Smart Kids

There are quite a number of useful rules of thumb that you can follow to kick-start your financial planning process. Since everyone’s situation is different, you can use rules of thumb as a general guide. They help make good estimates or approximations in making financial decisions such as how much to save, or how much debt can I have. There are no concrete financial numbers that can define one’s success, but there are some basic rules i.e., rules of thumb, that are widely used to gauge progress and keep one’s finances on track.

To answer the basic financial planning questions on saving, emergency fund, debt, mortgage, retirement and more, here are the most widely used rules in personal finance:

1. Savings

The Balanced Money Formula

The balanced money formula is a budget framework, which breaks down your budget into 50/30/20. According to this rule, 50%  of your income goes towards necessities, 30% to discretionary items and 20% to savings (includes debt reduction). This 20% saving rule applies to create a retirement fund, saving for unexpected expenses and paying down debt. The rule works because it helps users categorize spending and balance obligations, goals, and lavish spending. Remember that this rule only serves as a basic starting point for financial planning. Thus, it shouldn’t be taken as the entire gospel. Since we have different strokes for different folks, you’ll need to design something that works best for you.

2. Emergency Fund

X Months of Expenses

To determine how much to set aside for your emergency fund here is a very clever rule of thumb. It states that you should stash away cash for X months of expenses, where X is the current unemployment rate. In other words, because Kenya’s latest unemployment rate is approximately 12%, you should aim to have enough money in your emergency fund to cover 12 months of expenses. Therefore, whatever your current monthly expenses are, save enough to cover one year of expenses. Having an emergency fund not only comes in handy when an emergency arises, but also keeps you from making desperate decisions that could set you back financially.

3. Debt

The 28/36 Rule

How much debt you can have is completely dependent on various factors such as stage of life, saving habits, job stability, and financial obligations. Thus to determine a good debt load, you can consider using the 28/36 rule. This rule stipulates that you should spend no more than 28% of your gross income on home-related expenses such as mortgage payments, property rates and other fees, and a maximum of 36% on servicing debt. This also includes housing expenses and other debts such as car loans or credit cards.

For instance, if you have a household gross annual income of KES 4.5M, then your mortgage, property rates should not exceed  KES 1.17M (26% x KES 4.5M) per year.  Furthermore, your total debt payment should not exceed KES 1.62M (36% x 4.5M) per year, including mortgage payment. Remember, this is just a rule of thumb and therefore, just a guideline you can use when shopping for a new home. In reality, your specific financial situation will determine what type of home and mortgage payment will best work for you.

4. Mortgage

The 20% Rule

Placing a 20% down payment for a house has significant financial benefits. For starters, it will lower your monthly mortgage payments and lower the overall mortgage cost. Though it may be difficult to raise the initial amount, it is worth the shot if you have the money. However, I wouldn’t recommend giving up your liquidity or savings to meet the requirements of this rule.

5. Retirement

20 x Gross Annual Income Rule

When deciding how much you should save for retirement, one basic rule of thumb is to save up to 20x your gross annual income. This means that upon retirement, you should have at least 20x of your gross annual income in a retirement fund. Although, you’ll traditionally set aside about 10% of your income every month, ensure that by the end of your work duration, you have enough to live on. This rule works well because it focuses on your future spending needs. Keep in the mind, that your spending habits upon retirement may differ, depending on the lifestyle you plan to live or future needs.

To ensure that your retirement corpus outlasts you, then withdraw no more than 4% from your retirement account. This way you can preserve your capital and keep a good steady income flowing through retirement.

Read More: How to Produce Income From Investing Forever

6. Inflation

Rule of 70

Inflation is the silent killer for most savings and investments. The rule of 70 is great for predicting your future buying power, particularly upon retirement. It specifically seeks to determine how fast the value of your investment will get reduced to half its present value. With the rule of 70, we divide 70 by the current inflation rate. In other words, because Kenya’s inflation rate has an average of 6.8% over the last 7 years, then it will take 10.3 years ( 70/6.8) to reduce the value of your money to half.

7. Investment

Rule of 72

For those looking to double their money, then the rule of 72 will help you determine how long it will take. Since the current interest rates on savings in Kenya is about 7%, then it will take about 10 years (72/7=10.3) to double your money. To triple your investment use 114 and to quadruple use 144. This rule is great as it provides a great estimate, for those serious about doubling, tripling or even quadrupling their investments.

8. Net Worth

Target Networth Rule

It is important to keep in mind that there is no single rule of thumb that is perfect. So here is a formula to determine how much your net worth should be. It was used by Thomas Stanley & William Danko in the book the ‘Millionaire Next Door’. The book studies self-made millionaires in America and presents this formula to help you determine if you are one. The equation reads, net-worth = Age x Pretax Income divide by 10 – in the case where your annual pretax income is KES 4.5M at 27 years of age, then your net-worth will be about KES 12.15M [(27 x 4,500,000) ÷ 10] – which may turn out to be high or low for some. But even with that, I would only recommend using this equation to determine your net-worth goal, where you can try to match, double the target, or do better.

Summing Up

These rules are great as they give great estimate figures of the ‘how much’ questions. They also serve as a great guide to making various investment decisions for those seeking to achieve financial freedom. However, if you want a more tailored and more detailed complex picture, consider more life variables or engage the services of a financial planner. Other than that, just move on to calculate how much that lifestyle will cost and determine what actions you’ll need to take today.

Image credits: Top, by Raw Pixel via Pexels.

Meanwhile, you can click on the following links to read more about financial planning:

• How Much of Your Pay Should You Really Save?
• 6 Big Risks to Your Financial Success
• How to Calculate Your Financial Independence Number
• How to Easily Calculate Your Net Worth?
• How to Double Your Money using the “Rule of 72”