Kyama Mugambi, an MBA student, kicks off our 'Taming Your Wallet' Series.

In his introduction, he introduces us to some of the risks associated with financial ignorance. He also starts us off on developing what he calls 'Financial Intelligence'.

Here’s a common nightmare many share – you get up one day, at 50 and realize – you are about to retire, you are flat broke and you have kids; all in the middle of college.

Running way from this nightmare, and striving to live out their dream, young adults in their twenties and thirties are devoting themselves to tight work schedules with long hours to build their career. Yet building a strong career is only half of the solution.

Developing what Richard Kiyosaki (author Rich Dad Poor Dad) calls ‘financial intelligence’ is the other part.
One must develop a solid understanding of financial principles that will lead to eventual freedom. Before that though, think for a moment about what you risk when you do not pay attention to financial intelligence.

In a moment we will consider some common obstacles to financial freedom. Before that though, think for a moment about what you risk when you do not pay attention to financial intelligence.

>> RISKS
Retirement options: Every once in a while when I travel to shaggs [up country] I meet a middle aged relative or family friend who is unhappy there and struggling to make ends meet. Some of them had well paying, high flying jobs but did not pay attention to their finances. At retirement or retrenchment they ended up with limited options. Let’s face it, some of those who retire to shaggs had no original intention of living where they are now, it’s just that they were not able to manage their finances well enough to create retirement options.

Gifted but ineffective: There are many great leaders who are not effective in their area of gifting simply because of their financial situation. What I mean is that some fields of leadership require a measure of financial independence if one is going to be effective. Such areas include politics and business. We need good political and business leaders; but it is difficult to be a prime mover in these areas if one has not been able to manage their finances well; and create a healthy surplus. [Unless, of course, one has no scruples!]

Stress: A leading cause of stress among young people is money. College students worry about how to survive with their meager resources. Young adults are stressed about how to manage their lifestyles with the little money they get out of their first or second jobs. Financial stress is the number one stressor in marital relationships. The stress only grows with age unless one figures out how to handle their money.

All this is what you risk by being financially ignorant.

>> FINANCIAL INTELLIGENCE
The first step to developing financial intelligence is to understand what the obstacles are to financial freedom. Let me outline just four of these.

Loans, long and large
Think through this for a moment. If, on your second job, you elect to take a loan to buy your dream car at Kshs 1million paid over 5 years - the interest is almost half of what you pay for the car. To put it differently, interest for your 1 million loan is equal to the value of a small decent car. If, for example you had the “luxury” [or humility] of being able to take a jav for two years, then saved the equivalent of your monthly car-loan installments, you can get the small car hustle free [financially]. Keep up the saving; drive it for 2 ½ years and you may just get the fancier one. All this without the worry of losing your job!

The longer and larger your loan is, the more expensive it is in the long run- irrespective of the comfort or social status that the item you buy gives you. You want to steer clear of debt [see Romans 13:8], especially when there is a chance that you might not be able to pay it back. [See Psalm 37:21] Save instead! Developing a discipline to save is the surest way to be financially free.

Leaking Wallet
Spontaneous spending is the enemy of financial stability. There are many things which demand your expenditure – cell phone bills, unplanned visits to expensive restaurants, SPAEX [spontaneous accessory expenditures], drinking and smoking habits. The sooner you seal the hole in your wallet the closer you will get to financial freedom. Developing solid, wholesome godly values about life will seal many of the holes in your wallets.

To set or not to set; Goals
Planning produces results. Great planning often produces great results. It’s scriptural! Check out Proverbs 21:5 and Isaiah 32:8. We do a great job planning in the organizations we work in but a lousy job of planning for our own lives. For our lives we adopt the attitude of “living a day at a time.” Ever thought about what your boss would say if you introduced “a day at a time” as a management strategy for your company?

Funny thing is that our lives literally outlive our jobs. The average Jo [ok, the average Kamau] works from 25 to 55. If he has access to modern medicine and is literate, the experts tell us that he may live to 85. If Kamau can set organizational goals and achieve them in his 30 year career, how much more important is it to then plan for the 60 years of life he has to live!

START NOW!! The Race Is Not For The Swift
Someone said “When you're in your 20s and 30s, it's easy to think you have all the time in the world to accumulate wealth and save for retirement. The truth is, you'll have to save a lot less if you start now and give your earnings time to compound.” Developing a healthy saving habit will help you become independent later on when your strength starts waning. [see Prov 30:25] Set a percentage to save and keep at it. You will be surprised how much your money will grow when compounded over 10, 20 or 30 years.

Those are some of the obstacles to financial freedom, and how to overcome them. Next time we will have a look at the basics of personal finance.

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