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Last week we saw that sometimes we are busy buying things we don’t want with money we don’t have to impress people we don’t like. Money touches every aspect of life and when people don’t handle their finances well it causes huge problems. We also explored the following three truths about money:
Money will not make you happy. The Roman philosopher Seneca said nearly two thousand years ago: “Money has yet to make anyone rich.” And the carmaker Henry Ford concluded that: “Money doesn’t change men, it merely unmasks them. If a man is naturally selfish or arrogant or greedy, the money brings it out, that’s all.” You are what you are, no matter how much or little money you have.
Debt will make you unhappy. Having money may not make people happy but owing money is sure to make them miserable: If your outgo exceeds your income, then your upkeep will be your downfall. In the old testament, King Solomon summed up the condition of anyone in debt when he said in Proverbs 22:7: “The rich rules over the poor and the borrower becomes the lender’s slave.”
Having a financial margin gives you options. The bottom line is that money is nothing but a tool. It is good for helping us to achieve goals, but the goal of getting money for its own sake is ultimately hollow. If you have little money, you have fewer options and you may not be able to live near the school of your kids, drive the car you want, build your dream house, etc. It is therefore important to know what your financial margins are and to decide on the priorities you can afford within them.
So what can we do practically to earn and manage our finances daily? Here are some suggestions:
Make up your mind. It takes a personal decision to begin managing your finances properly. This applies for the family budget as well as for business. It is planning and budgeting that is required here. And it helps to begin with setting aside money for savings or investments first. Monthly that is, when the pay cheque arrives. This will leave you with the rest to spend on the living or running expenses. Turning this principle around will never result in an accumulation of reserves and will leave you at the mercy of the money lender when you suddenly need it. It sounds so simple but in reality it is not. More often, money is first spent on unnecessary items and luxuries, just to leave us short of money when the bills arrive. Just consider the mobile telephone. I have one that works very well and is strong enough to survive a fall from the table as it has done dozens of times. Other than that it is rather simple and looks basic and I am often laughed at as my cell phone doesn’t match the fancy looks and functions of more trendy ones. If this sounds familiar to you, go back to the opening line of this article and think again: “Do I need it?” followed by “Can I afford it”.
Put the value of things into perspective. People tend to value money and things over what is really important in life and that is: other people. And in a culture where relationships are so important as is the case in Ethiopia, this may bring about serious family and social problems. Recently I was on a business trip to another African country and I read in one of the daily papers that a teenage boy had killed his father with a knife as they had an argument over a bag of beans that was missing from the house. It turned out that the boy had actually stolen the bag and sold it for some money he needed. To put your personal attitude about money in perspective ask yourself the following questions:
• Am I preoccupied with things?
• Am I envious of others?
• Do I find my personal value in possessions?
• Do I believe that money will make me happy?
• Do I continually want more?
Reduce your debt. Going into debt for things that appreciate in value can be a good idea, like buying a house or investing in your business, but only as long as you can manage them well. Getting into debt for unnecessary luxuries will lead to problems though. Sometimes people continue repaying their loan for things they no longer use or need.
Begin planning your finances now. Someone once observed that the difference between the rich and the poor is that the rich invest their money and spend what is left, while the poor spend their money and invest what is left. The point is that if you don’t plan on finances, you will sooner or later be in trouble and this is so for your personal life as well as for corporate life. I have seen people taking a loan to invest in their business and spend it on a luxury car or fancy office first. Who is kidding who here?
And so in the end it is all about values, setting priorities and planning your personal, family or corporate life. Remember: “Failing to plan is like planning to fail”.