In Summary
  • If you cannot manage Sh100, you will not be able to manage Sh100 million when you get it
  • Many times we spend bits and pieces of money here and there mindlessly

One of the most talked about topics in personal finance has to be financial discipline. If you don’t learn how to account for your money and manage it, nothing else will make sense. A budget is one of the tools people use to manage money, but there is more to discipline than writing down your spending plan on a piece of paper.

Most people like to hide behind the excuse that they are waiting for a time when they have huge amounts of money, before they start tracking where it all goes. But the thing is that you cannot spend your money aimlessly, no matter how little, and still manage to create wealth.

If you cannot manage Sh100, you will not be able to manage Sh100 million when you get it. This is because the attitude you have about that little money is the very attitude you will have when you get more money. For example many people who win millions in lotteries find themselves worse-off financially, a year or two later.

If you are not deliberate about how you spend money, you will be caught up in a vicious cycle of working to earn more to spend more. The world will never run out of things to buy and the general cost of living continues to rise as long as you live. The only thing that can take you off that trap and put you on the path to creating wealth is financial discipline. This means controlling yourself and your spending habits.

With discipline, you are able to delay or forfeit the purchase of certain things today because they are not part of the big picture.

REAL VALUE OF MONEY

You will also be able to make the necessary lifestyle changes that take you closer to your goals. Most of the questions I receive around expenses revolve around lack of discipline. People spend money they do not have and ask me how they can control impulse spending.

It is not that hard; you can become more disciplined if you put a monetary value to your time and effort it takes to get an income. Let me explain. Many times we spend bits and pieces of money here and there mindlessly. You have Sh50,000 in the bank on payday and you take out Sh5,000 for a night out without thinking. You made that decision knowing that you still have a chunk of money left in your account. It is not a big deal, right?

However, if you knew exactly what it takes for you to make that Sh5,000 you might make a better choice. To put it another way, if you tell a business owner to spend Sh50,000 on something, he will remember how difficult it is to make that money and will consider whether spending that money is worth it. You can do the same with your money. How much is an hour of your time worth? Say you earn a net income of Sh50,000 a month.

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