Money Management For Street Boys & Girls
A wise man once asked me, "Do you know what's more important than making money?" I shook my head signaling that I didn't know. "Money management", he answered. After pondering on that and analyzing the experiences I've had with money, I realized that there's some wisdom in the answer.
It is easy to make money, but it takes discipline to keep it and make it grow. And that is exactly what money management is about. Because I bet you that money leaves faster than it comes, and no amount of frugality can protect you without understanding how to manage it.
So I write this article for young people who are seeing some revenue from their craft, and older people too, as some may know of these principles, but I see only a few apply them. For instance, the recent Menzgold scandal in Ghana, which saw many get their monies locked inside a scheme promising 7-10% monthly returns, some of the victims were supposedly educated civil servants who are believed to know better.
Even worse, countless lottery winners become millionaires and lose everything shortly after. So I believe money management is not common knowledge, as such it is common to see stories of people losing their life savings in predatory schemes and ventures that are designed to do exactly that, and this article aims to spread some knowledge to help avoid these tragedies.
To understand money and manage it, you need to understand risk and risk management. In simple financial terms, risk is anything that could cause partial or total loss of your money. Once you get money, know that you've assumed some type of risk too, regardless of where the money is kept or handled.
If you keep your money at the bank, there's the risk of insolvency, or bankruptcy. Although regulators are there to ensure that this doesn't happen, it does happen once in a blue moon, especially in investment banking, like the fall of Lehman Brothers Holdings Inc. in the United States.
If you keep your money in self-custodial digital wallets like crypto, you're still exposed to the risk of loss if you accidentally lose your keys, and also the risk of cyber theft and fraud. So what is the best way to keep money if all these options come with one kind of risk or another?
There is no right answer, and that is why money management is important. The goal is to make sure that your money is protected from the risk of loss which can come in various shapes and forms. I will not be able to exhaust every type of possible risk, but I'll share some useful principles that will protect your hard-earned money from bad actors and maybe grow it over time.
Never Keep All Your Eggs In One Basket
This is a popular quote and the inherent wisdom applies to money too. Rule number one of money management is that you should never keep all your money in one place no matter how safe it seems. If you break this rule, you're just setting yourself up for heartaches and high blood pressure. Never keep more than 25% of your money invested in one asset or commodity.
When you break up your savings into four parts and you put each of them into different places then one fails you still have three left. Diversification is key, and that's the premise of this principle. Diversification will save you a lot of stress and pain.
If you don't have the means or luxury to diversify from the start, you can go into a relatively low-risk asset and slowly diversify over time.
Always Do Your Own Research
This is the first thing you have to do before you put your money anywhere at all. Do your due diligence on the institution taking your money, and the types of risks that are likely to be present. Never believe what the sales agents tell you until you do your own research and you're satisfied with taking on the risks.
Doing the research is time-consuming and not a very pleasant experience but you'll be saving yourself a lot of pain and stress in the future. You will be able to discover inconsistencies, and half-truths that the sales agent may not otherwise tell you but will be essential to the safety of your money. For example, a business might have a sound model but the jurisdiction may be hostile which is a real long-term risk that you have to consider.
So you've found a really good place to put your money, now what's next? The holy book of James 1:6-8 teaches the importance of believing and not doubting. It goes on to further state that whoever doubts is like a wave in the sea that is driven and blown about by the wind. Know that however you decide to utilize your money, you must believe that it aligns with your vision and life thesis.
Believing in whatever you're doing builds conviction, and that will keep your head straight when hard times hit and you need something to hold on to. The beauty of having conviction is that whatever you believe in will eventually materialize given enough time. Persistence and patience are the keys here because nothing great comes overnight, and you'll need to wait and build up your portfolio slowly, one brick at a time.
That being said, money takes time to grow, and it takes more to manage. Financial freedom is a must for all the people of God, and on this note, I wish you the best in your financial endeavors.