There are probably thousands if not hundreds of thousands of books about personal finance. Many if not all acknowledge the importance of understanding personal finance and how it contributes to overall better life. However, for many people like us, these books were not written for the countries we live in. This isn’t a problem when the books focus on principles but I’ve seen many people struggle to adopt methods designed for a different reality with a different set of rules and considerations to their own. So how do you take all the advice, lessons, ideas, principles and methods you learn from various sources about personal finance and make personal finance personal?
Understand the Context
The first place you need to start is to understand the context the material comes from. It’s important because it comes with many underlying assumptions that come with the ideas. So make sure you have a clear idea of the context that applies to what you are consuming. It also helps to have an understanding of conditions in the context though this is not necessary. Sometimes all you need to understand is that things are different. It does help if you know how they are different but it is not essential.
Understand your Laws and rules
The second thing you will need to have a very good grasp on is the laws and rules in your context. This is paramount. When it comes to financing, both personal and institutional, what you can do simply comes down to what the rules allow you to do. We’d all love to make tax-free investments but you can’t make them if they are not available in your territory. Don’t worry, you don’t need to be able to rattle off each law from the relevant act by section and subsection. Stay tuned to the news and look at our business news section for interpretations of the law that give a simple working understanding of laws and what they mean for you.
Understand the Parameters
The parameter is a fancy word for the measure but I like using it. What I mean here is that you need to have an idea of how to measure good personal financial management in your context. Income levels as a start will play a big part in how far you can go and therefore what you can expect. Working with income levels that are not accessible in your context is a recipe for disappointment and ultimately disaster. You need a real understanding of what constitutes making it work. Dreaming of achieving things with options that don’t exist or apply won’t get you far.
Figure out What’s possible
If you combine your context, laws, rules and parameters you now have a realistic idea of what’s possible. This is what you can work with and how all those great ideas are realistically expressed in your context. Dreams of becoming a real estate kingpin off cash purchases while listening to gurus in markets that have easy access to mortgage finance, perhaps too much of it if you look at the 2008 sub-prime mortgage crisis, will leave you disappointed. This is where you start to build your long-term plan. And it depends on just how much you want to do. The rules, laws and context are not meant to discourage from doing things but rather to encourage you to know how to do things in detail.
What you can start doing today?
Having a plan and a path is not enough, you need to start taking action. And to do so you need to figure out what are your first steps. Opening that account, signing up for that service or simply joining that community to know more. You need to be clear on the first steps and of course, you need to start taking them.
The personal comes first for a reason. And these tips are to help you understand what it takes to make the various lessons from the different sources personal. Ideas are only as good as they are useful.