Duit Bijak Hutang Bijak

By Ryan J. Taylor

Turing debt into wealth is not complicated and it can be done is a little as a few years if you have the patience and discipline to stick to your plan.

The first step to turning debt into wealth is to determine exactly how much money you have coming in, and how much you have going out. In other words, what does your personal cash flow statement look like? If you have more money going out than you have coming in, then one of two things need to occur (or both): increase your income, reduce your expenses.

The next step is to review your spending history over the past few months and identify areas that you can reduce or eliminate expenses. This step should be taken even if your personal cash flow statement is positive and you have money leftover after all of your expense. By doing this, you can turbo charge your debt pay down process and get on the road to wealth sooner.

Depending how motivated you are to turn debt into wealth, you may consider things like temporarily cutting off the cable, riding your bike to work and brining a bagged lunch, canceling your magazine subscriptions. All of these areas that you can find small savings will quickly add up to large amounts of money that you can apply to paying off your debt. Remember, this is just a temporary solution to get you to the next level, which is to reach your financial goals by becoming wealthy.

It is a good idea to also focus on ways to increase your income. Not only can this help you pay off your credit cards faster, but once you are out of debt you can apply that extra income to your investment fund and become wealthy in twice the speed.

By Ogunbiyi Abel

No One Becomes Wealth Without A Saving Habit

"A penny saved is a penny earned" Benjamin Franklin, American State man/inventor 1706-1790.

I grew up with linking children's saving in the home with the local piggy bank known in Yoruba language (a tribe in Nigeria, West Africa) as "Kolo". Today, it had gone to extreme because of our currency and economy. When must learn and cultivate the habit of saving for our children's education and other future obligations. They also need to be taught. What you don't have known nor do, you can't teach.

Saving is the best way to put your money to work for you. When you save, your money grows - doubling, tripling, quadrupling and so on it is a way to earn money without lifting a finger. And if you run into an unexpected windfall such as your profit share, housing, upfront and all those allowances that the working class gets out a portion of that into your financial objectives children's education. You will quickly see how small sums can add up to big Naira. And how getting the habit of saving will put you on the road to becoming a millionaire. The best way to reach financial goals is through "saving".

A second rule is the amount saved is less important than getting in the saving habit. I once told a friend in 1996 to buy a share of a firm, but decline saying "how can I buy at low as $15 it is too small and when I have money I will buy higher quantity and outstanding stocks" today the other person who bought them enjoys better than him. He is yet to buy a single unit in the company.

Remind yourselves that small amounts add up. The humble small beginning of little consistent drop makes a large pool of financial ocean resources.

· Pay yourself first, small amounts add up.

· If you save $0.33 daily $106.46 in a year

· Save to reach goals

Save at least between 5-25% of your overall income. From each pay cheque or income, save first; spend second.

i. Choose a convenient saving plan either with a bank or portfolio manager

ii. Start off easy: for business persons, you can use the local daily monthly and yearly contribution "Esusu or Ajo "with fellow business neighbor, workers, friends, church member, peer group etc. However make sure that they are people who won't take off with the money once they collect it.

iii. Let your saving had time frame for increasement in % paid

iv. Stick to your plan

v. Add to your saving each time you are paid and don't let minor setbacks keep you from your schedule for meeting your financial goals. If you have a minor emergency, you may need to modify you savings plan temporarily or use and emergency funds that is already established, but resume your savings habit as quickly as possible.

Use your savings and investment to pay for the goals you've set don't grow so enamored of your bank statements that you are reluctant to spend for the goals you established.

Let us not forget that wealth is a way of thinking and not a naira amount in the bank. Forbes magazine defines a rich person as one having $1 million in income and $10 million is net worth.

Savings is a vital discipline that leads to wealth. No one becomes wealth without a saving habit. Steady plodding brings prosperity, hasty speculation brings poverty. Savings is paying yourself first set apart a part of your income on regular basis. Savings early make the first million to be easy there is a large difference between a man who starts saving at age 20 versus age 30 one of the amazing wonders of the world is compound interest $20 invested daily over 10 years at 20% interest will produce $240,000 over 20 years will yield $2 million over 30 years will yield N$million, 41 years later will yield $15 million if we will save $20 daily for a child till age 54 at 20% compound interest he will meet $1 Billion in his account.

Savings should be a way of building excess cash for investment in other more profitable higher yielding portfolio. It is not to be kept idle in the savings account otherwise it get corroded by inflation.

In the financial world, leverage means the use of borrowed assets to magnify a person’s small effort into a large result.

It is the asset you borrowed to increase your effectiveness and operational base leverage is a two edge word if you are careful if can make you a lot of money. If we are not careful it can cut you the other way.

The number one rule of wealth creation must be "Pay Yourself First".

What do I mean by that, simply whatever you earn per month you take out a minimum of 10% and put it into your savings account or your investment account; you live and pay your bills with what you have left. You PAY YOURSELF FIRST.

I know, I know, I can hear you say "How can I do that, it's taking me all my time to keep my head above water as it is".

Well what you must do is sit down and have an honest look at what you are spending your money on.

Put a basic profit and loss sheet together and at this stage it does not need to be complicated. Very few people do this.

The budget plan poor people work to, works like this.

Go out and earn as much money as you can, pay the bills, spend the rest, because that is how much it costs to live. This plan and way of working will only keep you working hand to mouth and keep you on the treadmill until you die.

So pick up the pen and paper and let's have a look.

On the left-hand side of the paper write down your monthly income. That is everything that is coming into the household, your salary, your spouse's salary and any other form of income.

I don't want to hear "I don't know it varies every month" Work a monthly average out or work to your basic rate.

On the right-hand side of the paper write down everything that you are paying out per month, make a full list.

I don't want to hear "I don't know some things we pay for quarterly" work out how much you are paying a year and divide it by twelve. O.K. To be solvent your left hand total should be higher than your right hand total.

If you're right hand total is higher than your left hand total subtract the left hand from the right hand total and this will show you how much you are running in to debt each month.

For some this little exercise is an eye opener of how our spending can get out of control and slip through the net if not kept a check on. But let's go back to this paying your self first.

Wealth can only be created by not consuming, so we need to stop spending and create the habit of saving. Therefore you need to look at your right hand column to see where you can stop consuming.

To be successful at this you must have an honest desire to create your own wealth and the determination and discipline to change your lifestyle so it's imperative you know what you want and why you are doing this.

Be honest with yourself, where can you cut back?

On a £20,000 per annum net income you will need to be paying yourself £2,000 per year. That is £166.67 per month.

Where is that going to come from? So let's look at some of the most common areas of our uncontrolled consumerism.

If you spend £5 a day on cigarettes that's £35 a week, or £140 a month.

Have a look at the food bill, can you cut costs or get better value for your money by not buying conveniences, sweets and junk food.

Take a look at your utilities; switch off the lights and electronic equipment when on standby, cut back on water and gas usage.

Nowadays you won't be looked at as being a miser or skinflint but a global friendly eco warrior.

What I am saying here and I think you will agree, with a little bit of thought and effort you can change your habits and lifestyle in small ways to find that 10% you need to start the ball rolling.

Take an honest look at the No 1 Rule of Wealth Creation "Pay Yourself First" and you will soon see how to turn these small gains into massive wealth creation.