A while a go I read a book called the Automatic Millionaire by David Bach and it had a profound effect on how I handle my personal finances. There are three key takeaways from the book and I will demonstrate how I have applied them to my money.
1. PAY YOURSELF FIRST. I work so hard. Raising up at 5.30 am and returning home after 7.00 pm. I surely deserve to be paid first. Before I buy Yaka, pay school fees, pay all the bills, buy fuel, I make sure I pay myself first. Paying myself first doesn’t mean I go out and splurge on all sorts of things to fulfill my passions and desires. Paying myself first means I get to keep this money and invest it my financial freedom. We spend over 18 years in school preparing for a job. Once we get the job we find ourselves enslaved by the very job when we live paycheck to paycheck. I am currently paying myself over 50% of my net salary. Some people may say that I am depriving myself. In response I would argue that they are the ones who are actually depriving themselves by not investing in their financial freedom. On the contrary my lifestyle has not changed a bit and I occasionally indulge when appropriate.
2. THE LATTE FACTOR. The Latte Factor is that daily habit which costs you a little money every day. Overtime this money adds up. I like taking Tusker Malt. Say I take two bottles daily which would cost me about 8k. In one year I will end up spending 2.92m shillings. If I continuously save and invest this money in a unit trust like STANLIB I will end up with 55m shillings in 10 years. This amount will generate 500k per month from thereon! All this from simply taking two Tuskers daily. So each time I take a Tusker I know I am drinking away 55m shillings! If you keenly look at your lifestyle you will be sure to find your Latte Factor. Simply become aware of this habit and gradually work to eliminate it and you will surely reach financial freedom.
3. AUTOMATE ALL FINANCIAL DECISIONS. Saving and investing is a very difficult habit to master. It is like dieting or working out. Trying to use your will power to save money is a herculean task. I have found it is more effective to put everything on auto pilot. I have instructed the Accountant at work to deduct 200k and put it on the staff SACCO. I have also set up SIX STANDING ORDERS on my salary account using my Mobile Wallet App which automatically execute on the 30th day of every month at midnight. The first one is 100k which goes to a 10 year education insurance policy for my daughters with Prudential. The second one goes to an insurance investment policy with Prudential. The third one goes to STANLIB unit trust. The fourth one goes to UAP unit trust. The fifth goes to Crested Capital to buy one year treasury bills every month. The sixth goes to a savings account in another bank to handle emergencies and unexpected expenses. All these transactions happen while I am sleeping and I don’t touch anything. I occasionally check to see if everything is working fine. If I do this consistently I will have a small fortune within a few years!
By embracing these three key concepts plus the snowball debt reduction strategy by Dave Ramsey and other strategies I have seen the tide of my personal finances drastically improve! Every month without any additional effort on my part my investment account value keeps growing while my expenses keep reducing! Plus I have been able to clear ALL my outstanding loans.
The interest income is beginning to trickle in and will soon overflow in my wallet! The MONEY MINTING MACHINE I have set up is now going into HIGH GEAR!
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Thanks for your message. It is a great idea.