Dreaming of Financial Stability
Most people dream of starting their own businesses someday. Who would not want to? When you scan the pages of Forbes Top Wealth people, you’ll see people who own businesses, wealthy professionals such as models, actors and actresses. Though likelihood of becoming a successful actor or actress is very minimal, people can still strive for financial stability by becoming their own boss.
Thinking of starting your own business?
One of the hurdles of starting a business is the lack of capital. You need money to start your own company. However, financial literacy is also important and should come before capital.
What is financial literacy and how do I know if I am literate?
According to Public Broadcasting Service (PBS), Personal financial literacy is more than just being able to balance a cheque book, compare prices or get a job. It also includes skills like long-term vision and planning for the future, and the discipline to use those skills every day. There are many definitions floating around the internet but I chose this one because it is very simple and can be understood even by the least finance savvy.
Using the above definition, I’ve come up with 6 questions to quickly determine if you are financially literate. If you are ready to find out, just answer yes or no to the questions below:
- 1. Do you know to balance a cheque book? To make it simple, do you know the ins and outs of your cash flow?
- 2. Do you have a job?
- 3. Do you compare prices?
- 4. Do you have a long term vision?
- 5. Do you have a plan for the future?
- 6. If you have a budget plan (I’m sure you do if you are reading this.), do you stick to the plan?
If you answered no to any of these questions, then chances are you are not financially stable because you do not have the proper financial knowledge.
So what is the next step? If you are feeling something out of whack in your body, don’t you visit the doctor to find out more? The first step is to consciously know yourself. Here are the steps from ANZ Money Minded, an award winning program by ANZ (4). It’s great and it’s free!
- 1. Know yourself.
- Recognise the link between attitudes and approaches to managing money.
- Identify and reflect upon your own attitude to money..
- Set tasks to balance your attitude to money.
- 2. Spend Wisely.
- Recognise the impacts of spending leaks on your financial situation.
- Prioritise your spending by applying the concept of needs and wants.
- Identify ways to reduce expenses.
- Diarise your daily spending to identify spending leaks.
- 3. Clarify your goal.
- Recognise the impact of not having clear financial goals.
- Define your SMART goals in relation to money.
- 4. Plan your spending.
- Determine what’s left over on pay day after priorities have been taken care of.
- Recognise that regular savings are equal in importance to other budget commitments.
- See the benefits of having a budget in place.
- Take steps to create a budget.
- Plan for unexpected life events.
- 5. Bank Smart.
- Recognise the positive impacts of using appropriate bank accounts.
- State the advantages and disadvantages of various bank account types.
- Encourage you to shop around and ask if a better deal is available.
- 6. Avoid Dangerous Debt.
- Recognise the impacts of not maintaining a positive credit history.
- Identify advantages and disadvantages of various types of credit providers.
- 7. Watch out for Credit Cards.
- Recognise the potential cost of credit cards.
- Identify techniques to effectively man
- 8. Plan for your future.
- Recognise the benefits of effectively managing superannuation.
- Recognise how superannuation funds work at a high-level.
- List common features and investment options of superannuation funds.
- Identify key factors to consider when selecting, switching or consolidating superannuation funds (or pension funds).
I encourage you to visit moneyminded to go through some activities relating to the steps outlined above. If you are currently paying for a debt, you have to work on clearing this debt first and foremost before undertaking any business.
After achieving financial literacy, you are now ready to start a business. You don’t need a big capital to do that. In fact, I’ve read from a magazine of a woman who grew her business from selling ice candy (see story here). You will need your brains to balance the books, creativity to keep the business afloat, intellect to stake out the consumers in your area and above all else, perseverance. Well, before all this you must have already come to a decision to work harder than you’ve ever been.