Money isn’t evil, money is just money and fortunately but unfortunately we cannot live without it. As much as we may want to deny and fight it, we need it! More importantly, we also really, really want more of it.

So we don’t have to fear money, we simply have to get our heads around it and take control of it in our lives. We can eliminate financial stress and also reduce the impact that money makes in our lives by just being in control of it.

Having a high-end salary or rich parents may have it’s perks but it never has and never will teach anyone how to use money the right way. In fact, it may actually have the opposite effect if we take it for granted. We have to learn our responsibility towards money the hard way! The hard way is learning, becoming financially literate and understanding finances.

As I see it, we have three main responsibilities towards our money:

1. What We Spend It On

We use our money pretty much every day but what we spend it on and why we spend it on those things is what really matters. You have to enjoy your money but also be cautious not to splash it out extravagantly.

To some extent, I believe that some of us have money sense and some don’t but I sill believe that anyone can learn how to make good financial decisions.

You need a motive to spend your money and you need to weigh up the pros and cons of the motive. If you sincerely think – with your brain, not your heart – that what you are about to use your money on is absolutely necessary or that it contributes towards a positive cause in some way or another, you have a worthy objective.

Here are some examples:

Buying Gifts

Buying your children toys, your wife a gift or even yourself a gadget for whatever occasion is for a positive cause. You are giving something to someone you care about and either out of love, appreciation or reward you give a gift. You have to consider the cost of the gift and if you are financially limited, a smaller, less expensive gift can have the same heartfelt thought and effect. Money doesn’t translate into love at all but the act of giving a gift could.

Investing in Equipment

May it be for work, a hobby or personal reasons, you could invest in something necessary to fulfil a specific task. You may want to acquire a saw or sander to build or refurbish your furniture. Or an expensive device to use for work or starting your own business on the side. These are examples of things that have a constructive cause and investing in something for the right reasons is worth the money!

On a different note…

Taking out a loan or making debt to buy something that you really want but don’t really need and which doesn’t have any constructive motivation is a bad financial choice. You may have ninety reasons in your head why you really have to purchase it but are they really for real?

2. Budgeting

This is the part that most of us are extremely terrified of! Budgeting!

Many of us are too fearful to even look at our bank statements because we’re scared of what we are going to find, am I right? It’s easier to just ignore them and dodge those minuses, right?

The truth is that if you haven’t looked at your income versus your expenses recently, at least once a month, you urgently need to. It is of utmost importance that you know what is going on in there so that you can not just make the money month but also save at the same time and be left with more for constructive spends that build up your life. Constructive spends can be assets that will allow you to earn even more income!

If you’re not making it through the month and you have a large amount of debt, you have a problem but it is not too late.

Open a spreadsheet or get an app to jot down all your expenses on a monthly basis as you go through your bank statements for the last three months. Start on the 1st of the oldest month and work through it, making a note of your regular debit orders such as policies, insurance, vehicle, bond/rent, average petrol spend, average grocery spend, medical aid, etc. Then get to a total and do the same for the other 2 newer months so that you get a vivid picture of what your expenses are on a month to month basis. Compare that to your income and voila, you know if you’re a liability or not!

As you go through your bank statements, you can just as well make a list on the side of the services and products that you do not need. You can literally phone/email those companies and cancel those liabilities. You’ll end up saving much!

Alarm you don’t use? Insurance too expensive? DSTV bouquet not being used to it’s full potential? Too many cellphone contracts?

3. How We Invest

How you invest is up to you really but you may need to do some research on what a financial asset is and what the best ways are to invest your money.

This investment that I’m referring to can be anything from putting money into a unit trust, money market, buying stocks, investing in property or even buying a financial asset such as a business which can then earn you more income in return.

I believe that pyramid schemes, network marketing and other related “assets” are note assets because at the end of the day you end up working for someone. Most of these networks make it seem like you work for yourself while they are standing on the receiving end with arms wide open. The people who start these pyramid scheme type of programs have an asset, not you.

In practise, most people think that buying a property such as a house is the first and most important asset investment that you should make. In theory and reality, it is not and it really just is not, period! Unless you have a large deposit or you can even buy that property cash and you are certain that it will appreciate in value, it most likely will be a liability and an ongoing expense. A house has to be maintained, remember? It has to be kept neat, looked after, maintained physically and structurally. Not only that but a house has monthly expenses such as rates and taxes that have to be paid and they can be hefty. If you live in the house, it makes sense instead of paying rent and paying off someone else’s bond but if you are going to rent it out thinking that it will generate an income for you, you may be in for a big surprise. I own two properties, the one that we live in and another one that we rent out. The one that we rent out has been more of a liability and expense than anything else up until now.

The most common way of investing in today’s modern life is phoning up your broker or your bank and putting away a fixed, annually incrementing amount thinking that the sad little 5% interest that they pay you in return for making them rich is going to make you rich? Wrong! These trusts are usually a good way of saving but not necessarily a great way of earning. The real people who own the income generating asset in such a situation are the ones managing the portfolios and actually trading with your money. Why invest your money for 5% if you can gain 50%, 100% or how about 7000% in return?

I’ve seen people on the stock markets trading currencies at a high leverage gaining 7000%+ in return for the investment and taking profit on that trade, walking away with a very, very big profit.

Or how about investing in a start-up? Or buying a business which is an asset that will generate an ongoing income for you at no work to you?

Just remember that an asset is something that can generate income for you without you having to do much ongoing work on it. If you have to work constantly to make your income, it is no longer your business or your asset but then it becomes your job. You don’t want a job do you? No, you want a business or an asset that will do the job for you and hire the people it needs to work those jobs.

Have fun, I’m not an expert, I’m just a successful entrepreneur and a financial fanatic. I love money and finances but it has never ruled my life and I have enough of it to not worry about it.

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