To call anyone a beginner in personal finance is unfair at best. We have all had to perform a balancing act from as far back as we can remember. It could be from something as simple as having to figure out what we are going to buy with our limited allowances. The more mischievous would have experience with figuring out how to spend the change when they were sent shopping as kids. As we grow up we have at the very least, thought about saving and even trying to grow our money. Beginner in the context of our discussion today specifically applies to two types of people. The first group are new to the concept of earning a regular income and making the best of it. The second group are people who have received an awakening about how much of a say they have in their finances and are determined to make a difference. Whichever of the groups you fall into, we have tips to help better manage your finances.

Watch your commitments

Success and its converse failure in personal finance are determined by your consistent commitments rather than by sporadic occurrences. This goes both ways. The expenses you are continuously committed to will derail your finances. Many misunderstand this about David Bach’s Latte Factor, stating that the occasional coffee won’t be your net worth. The occasional one won’t but when it becomes a regular expenditure, it adds up over time and these expenditures seldom come alone. The same can be said for the other side. Wealth is rarely accumulated by one-off windfalls but rather by your continuous additions to your net worth. So think about this carefully when embarking on your planning journey.

Insurance is King

Once you have an income, it is fair to consider it an asset. The problem is you then depend on that income to keep your lifestyle and life going. The counterintuitive part is that the more you depend on this income, the more you should spend insuring it. Insurance has come a long way and we have many types of insurance available to us in the world today. You can insure your health. Life, accident insurance and even income protection which pays you up to 100% of your income if you are unable to generate the income for an extended period. It’s important to put insurance at the forefront of your financial planning.

Build wealth

Wealth, in its simplest terms, is keeping money. While the common thinking is that a high income makes you wealthy, this isn’t the case. High-income retention (saving) makes one wealthy if it is maintained over time and put to good use (invested). So building wealth comes in two parts, we must contain our expenditure to accumulate savings and direct these savings towards places where they can earn us more money.

Money is a tool, not the goal

While our pursuit in personal finance is the accumulation of money, we need to remember that money is a tool and not the end goal. Zimbabweans will particularly understand that money is only as good as it is useful. Without utility accumulating money is an empty victory. So should we stop caring about money? Far from it. We need to be aware of why we care about money. This means different things to different people. Some want to buy their dream house, some want to travel the world and many other reasons for accumulating wealth. Be clear about what yours is.

Debt is not created equal

When you borrow, the most important thing to a lender is your ability to pay back the money. So if you’ve just stepped into an income, you represent a good opportunity for a lender. Debt is attractive because, on the surface, it allows us to acquire something today that we would otherwise have to save up for a long time. However, debt is also tricky because it is not all things we should be financing this way. Much like money being a tool what constitutes good and bad debt is largely personal. It depends on individual circumstances. The key is to understand what debt means for your bottom line. If you’re constantly taking payday loans, you may want to look at your expenditure.

You will gather from this list that personal finance is much more about mindset than tools and methods. The mindset will guide you towards which tools and methods to employ to get your finances right.