Peter was a security guard for 15 years but now is a wealthy farmer and business man, owns rental properties and lives in a house worth 50 million shillings . He didn’t manage to go to university but he has still managed to build wealth.
Brian is an Engineer, has a masters degree and has been working for 15 years as well; however, he still pays rent for a house in Buruburu and is struggling to pay school fees for his children.
It’s expected that because Brian is an engineer he should be wealthier than Peter, but because of Peter’s good money habits, he managed to get ahead of Brian.
When it comes to personal finance, what matters most are your money habits and unlike popular belief, financial success is not limited to those who are from rich families or have white-collar jobs.
There are very many examples of people who have managed to become rich but were born in poverty. People like Chris Kirubi, Jalang’o, Churchill, the late Njenga Karume and many more.
Here are some money habits to start in your 20s that will help you build your wealth
1. Live within your means
For example, in Peter’s case, he was earning 10K a month and as such ensured he did not live in a house that cost more than 3K. Whereas, Brian with a monthly salary of about 45K, chose to rent a one bedroom house in a good neighborhood that costs 25K.
Truly wealthy people don’t feel the need to show that they have money. A good example is Bill Gates. Even though he is worth over 90 billion dollars, his house is worth less than 130 million. It might seem like a lot but compared to his net-worth he could choose to get a house worth a lot more.
So why would you decide to pay rent of 20K when your salary is 40K per month?
You should never use your money to finance a lifestyle.
2. Start saving for retirement
There will come a time you will have to retire meaning you will no longer have a source of income. Where will you be getting money from?
You don’t want to start depending on other people after you retire or change your lifestyle because you no longer have the money to sustain it.
For example, if you currently earn 60K, you don’t want to have to change your lifestyle when you retire because you no longer have the money to sustain your lifestyle.
This means coming up with a plan to have money to use when you do retire. Saving for retirement is something you should start doing very early on in life.
After all, the earlier you start saving the more money you will have.
3. Save and invest
Peter used to save his money because he knew he wanted to buy land and start farming and because he was living within his means, he was able to save more than Brian who spent all his money on rent in an expensive house, buying a car and buying expensive clothes.
Saving is good but it is not enough to help you build your wealth. No one becomes rich by saving all their money. Wealthy people invest the money they save either by buying stocks or bonds.
It will take you years to save 1 million shillings especially if you do not earn 6 figures whereas, if you buy land worth 200K you can sell it years later for a lot more than that.
4. Manage your spending
How many times have you found yourself wondering where that one thousand shillings went?
Just because you can afford something doesn’t mean you should buy it.
You need to always know where your money is going, not knowing how you spend your money means you will be unable to budget properly and you can’t be accountable for how much you spend. Keep track of even the little things even how much money you spend on credit.
For example, how much time do you spend watching TV? Chances are less than 4 hours so why are you paying thousands of shillings for hundreds of channels you will never watch?
Keep in mind that poor people spend their money and save what’s left. Rich people save their money and spend what’s left.
Poor people spend their money and save what’s left. Rich people save their money and spend what’s left.
5. Educate yourself
Knowledge is power and one of the reasons why people fail to build wealth is a lack of knowledge.
If Brian had taken the time to understand the importance of saving and how to use his money wisely, he would have been able to build his wealth.
So read all the books you can and learn about how to ensure you achieve financial freedom. A good book to read is ‘Rich Dad Poor Dad’ by Robert Kiyosaki & Sharon Lechter. Its a very educative book and explains finance very well.
When you are in your 20s and 30s learn about how to invest, where to invest as well as other ways to increase your earnings. Being as smart as Peter when it comes to finances will help you improve your financial status so that by the time you are in your 40s, you are not at the same place you are in currently.