After reading lots of books on Personal finance and
Investment, I decided to put my vast knowledge to work.
I currently work at a
job I love but which leaves me with little money at month-end. I daily take a
record of all my expenses; I know where every single kobo of my salary goes.
I know exactly how much I spend in a month.
The following are the Personal Finance measures I
implemented –
1.
Pay myself first
In 2011, I set up a direct debit order
in my salary account to transfer a certain amount of money every month to a
Mutual fund account.
Now I plan setting up two others to
transfer some cash monthly to my Brokerage account and quarterly to my Fixed
Income fund account.
2.
Have an Emergency fund
I currently have the cash equivalent of my three months living
expenses stashed away in a High Yield savings account. I have lost my job once
and resigned from another too. In both situations, I encountered numerous
unplanned expenses and ended up spending a lot. Having an emergency fund can
greatly help to tackle unforeseen emergencies. I never touch it unless there is
an emergency, and I replenish it as soon as I can.
3.
NSD, LSD and HSD
Increase your No Spending Days, never
reduce your Low Spending Days and reduce your High Spending Days in a month. I
try to achieve this by staying home on most holidays to increase my NSD,
cut-back on unnecessary daily expenses like chewing gums and in between meal
snacks to increase my LSD, and I only buy necessities to reduce my HSD.
Recently, my Sony VAIO laptop motherboard
went bad and I couldn’t find a replacement. Rather than buy a new laptop, I
bought a similar but dead Sony VAIO laptop and replaced the bad parts with the ones in mine
that fitted and bought the other parts that needed fixing. I ended up with
another Sony VAIO that cost a fraction of the new one.
Anything I can do without for a month, doesn’t
make it to my list. For instance, a new suit, an iPad, another wrist watch and
movies.
4.
70 – 30 investment rule
Since, I’m investing for the long term
(over 30 years horizon), I put 70% of my investment cash in stocks and 30% in
Fixed Income and bonds. As a small investor, I rely on fixed income fund. But I
follow the stock market like a true Chelsea FC fan follows his club, I know
nearly all the important figures and trends. I research stocks, burrow through
financial statements from 7 years back and make some crazy financial
calculations. I manage my own brokerage account without any professional help,
I buy stocks of companies I’m convinced (after my calculations) will grow at
over 15% year-on-year and sell the ones I believe have derailed (regardless of their
stock price movement).
Result: Though, at first, I lost money after
money, I have recouped all my loses and have found an investment style that
works great (so far).
5.
Delay my big expenses
I don’t plan buying a car anytime soon.
6.
Create multiple income streams
Though I make money from my
investments, I run 3 monetized blogs and have a part-time consultancy biz.
Currently, my blog is yet to generate a profit and my consultancy biz is still
in its infancy, but I know that with time and efforts invested I will be
able to cover my living expenses from their earnings.
7.
I’m my biggest asset
The premium on skills (hard and soft) is
huge. That is why our parents make us start school as early as possible, knowing
that one day someone will be willing to give us a fat pay slip just to have us
around him.
Though I consider MSc and MBA luxuries,
I have been reading several MBA course materials. I spend a lot on books, very
expensive books too, on everything that interests me – swimming, business
analysis, java programming, php and sql programming, MS Excel and VBA, French,
Linux, Personal finance, Investment, Self development, Spanish, German, novels…
Last year, I took an online diploma course in
Stress Management by a UK school. And this year, I have already enrolled for a
Finance course, Data Analysis course and History course via Coursera. I just
recently concluded my video classes on History of the world since 1300AD, and
learned that there was a time when skilled workers were kidnapped. This
reinforced my decision to become skilled in as many things as I can.
While at the university doing my degree in Electrical
Electronics Engineering, I spent most of my library time reading books
on Psychology. I discovered that the brain doesn’t function like a bag, in which
you’ll have to push some things out to make space for new things. The brain simply doesn’t
get filled, the more you use it the logically bigger and more intelligent it
becomes. That was why Leonardo da Vinci could become an expert in nearly all
the known human disciplines of his days. He used his brain. Since I
discovered this, I stopped trying to focus on only just one field of knowledge.
