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Financial Literacy (the truth about wealth)

22nd Jul 2018

Guest Blogger ~ Chama Kalifungwa

“I truly believe that women should be financially independent of their men. And let’s face it, money gives men the power to run the show. It gives men the power to define value. They define what’s sexy. And men define what’s feminine. It’s ridiculous.” –Beyoncé

Hey ladies, Let’s talk about money…

Monica Drake an American fiction writer, published a piece titled ‘The Ongoing Joke about Women and Money Isn’t Funny Anymore’, in The Establishment. The interesting piece explored the stereotypical notion that women were notoriously ‘bad with money’ choosing to spend it frivolously, on things such as “shoes, designer jeans, and hair products” whilst men, on the other hand, were more likely to be associated as spending their money on more wise choices and “serious things” such as “stocks and insurance. “This stereotypical notion has been ingrained within society and popular culture for many years. Women are often associated with having an irresponsible relationship with money compared to our counterparts men.

This idea is encapsulated perfectly through the medium of music. Women and their relationship with money has been a popular topic within the genre. An example of such includes the 1953 Hit film ‘Gentlemen Prefer Blondes’, song “Diamonds Are A Girl’s Best Friend” -famously performed by Marilyn Monroe, the idea that while love is a luxury, material wealth (particularly jewels) is more valuable to a woman, idea further reinforced by the iconic 1961 song by Shirley Bassey “Diamonds Are Forever”.

-However, we women are in fact very money conscious and savvy despite what the general populous would have you believe. I, therefore, believe it to be crucial to dismantling the myth.

A study conducted by the Centre for Talent Innovation found that “66 percent of women in the US, UK, India, China, Hong Kong and Singapore” identify themselves as being the prime decision makers over household assets. Clearly, suggesting that women do think holistically about money and its value and importance as a whole.

I will now go onto explaining the importance of having financial literacy and the truth about wealth accumulation.

Fun fact: “95% of the world’s population owns 5% of the world’s wealth.” – Robert Kiyosaki, author of the ‘Cash Flow Quadrant.

Now when this information was presented to me it made me wonder what the remaining 5% of the world’s population knew about making money that I didn’t. Whatever it was must have been of value because they owned 95% of the world’s money… 95%? I messed up.

After further investigation, I came across a book called, the Cash Flow Quadrant which explained the four ways of generating income; Employment, Self – Employment, Business Ownership, and Investing.

Let’s break this down:

Employee’s leverage their time for money, meaning if they do not show up to work, they do not get paid and the amount they are awarded is determined by their employer.

The same is also true for the Self-Employed; although they do own their job their income is still determined by whether or not they actually show up.

Business owners, on the other hand, develop and have systems that generate an income for them as well as building assets. Investors place their money in assets allowing their money to work for them, giving themselves unlimited income potential.

It became apparent that making money was not the issue; you can always make money back. The value was in the time; once you lose time, you never get it back.

The next question was which side of the quadrant I truly wanted to be on, and whether or not my current activities – if continued, would help me achieve it.

 

Assets and Liabilities

Incomings vs. Outgoings

With this being said, it is important to discuss assets, liabilities and the impact that they have on financial health.

Assets are belongings that have the ability to generate an income, ideally enough to meet the needs of the individual, clear debts, pay bills etc. For example, a property that is being rented out accumulates residual income from the collection of rent paid by the tenant.

Alternatively, liabilities are anything owned that causes you to lose money or results in debt with no possibility of regaining any money lost. An example of this is a mortgage for a home which ultimately results in the repossession of the property if the monthly payments are missed. Ownership of this home requires payments to be met – not received.

The truth is we make investments in either liabilities or assets on a weekly basis, from buying a coffee to purchasing a car. Although we have no control over our basic needs, every other purchase is our responsibility to determine whether or not the liabilities we choose to invest in are worth the impact they will have on our financial well being.

Wealth is the possession of assets that far outweigh your liabilities.

 

Investments and Savings

Productivity vs. Activity

Savings require you to work for your money in order to see it grow.

Much of our financial health is based on how we generate our income and what we choose to do with it once it is received. The vast majority sit on the left side of the quadrant, and so their income will depend on how much time they have available to convert into money. With this comes the need to build savings in the event that time may not be able to pay for a rainy day. Savings can be a powerful way to keep money in case of an emergency, but when the need arises, you return to the cycle of having to find the time to remake the money.

Investing requires your money to work for you in order to see it grow.

On the right side of the quadrant, time is not the driving factor of their incomes growth – but rather the act of putting their money into assets with the ability to generate further profits from their investments. With the ability to regenerate money, the act of being able to do this allows for time to be invested in other ventures.

Financial Education

Many financial struggles are due to the requirements of time or little to no value being placed on someone’s knowledge and skills. Generating wealth has more to do with making money flow through assets and less to do with it being lost in liabilities before and even after savings.

The need and want to save money stems from an emphasis being placed on how to earn money through a job and what to spend it on. Following this; there is little to no education on how to increase earnings during the early stages of teaching and so hard earned money ends up in the hands of people educated enough to know what to do with it when it really matters.

So, with all this emphasis placed on being educated and experienced enough to be able to acquire a job… With all the time and effort we put into trying to earn enough to sustain a living… Where are the lessons; on how to exercise good money management? Where to really place money in order to generate more of an income? How to earn when there may be a lack of skills or availability? Which skill sets actually lead to the generation of money? How do we acquire them?

We really should be able to not only know how to earn money but what to do with it in order to maximize its potential and our ability to enjoy it. There is a high level of misunderstanding with regards to what investments and assets truly are, more often than not we are directed to many liabilities that are presented as assets ultimately leading us on a path of trying to maintain them at the possible expense of other desires and responsibilities.

The wealthy develop systems that not only generate an income but regenerate it over and over again creating numerous amounts of income as well as residuals. These are usually achieved through business ownership and/or investments into real assets, putting them in positions to continuously benefit from decisions and efforts they had made in the past – eventually not requiring their presence at all.

In essence financial stability is not about the amount of money that someone is earning and the best ways to save for the future (though in and of itself is not a bad thing) – but rather, where you can invest those in order to increase income potential. I mean it is all well and good having vegetables in the freezer, but once they’re defrosted their either consumed or become rotten. The real knowledge is in how to grow those vegetables and then you never go without. Learn how to grow vegetables and you become wealthy. Learning how to grow money and you become wealthy all the more. The right type of knowledge allows you to become rich. -RICH? “Residual Income Creates Happiness”.

Wealth is not massive amounts of money, but rather the mindset required to attain it. This can actually be available to just about anybody willing to find out what it is and develop it. No secret, just hard work and most importantly – smart work. Grab opportunities that increase not only your account but your time and most importantly your mentality so that you might just keep your newfound earnings.

A lot of people wish to be wealthy but ask yourself this: If I had the money, would I really know what to do with it? The Lord never gives us more than we can bear. Expand your knowledge and increase in the mindset of abundance – your circumstances will follow suit.

 

“People say that money is not the key to happiness, but I always figured if you have enough money, you can have a key made.” -Joan Rivers

By: Chama Kalifungwa

-Edited by: Onyeka Michelle

-Chama is a 24-year-old entrepreneur, investor, and mentor.

-Who seeks to help others develop multiple streams of income from their homes.

“Happy to connect. Happy to talk business !”

Instagram: @ckvli

Facebook: Chama Kalifungwa

-If you have an inspirational post around the topic of lifestyle and self-development that you would like to share/ contribute towards the blog, feel free to get in contact with me, would love to hear your proposal! 

 

 

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2 Comments

  • Reply furtdsolinopv 28th Oct 2018 at 4:53 pm

    I’m not that much of a online reader to be honest but your blogs really nice, keep it up! I’ll go ahead and bookmark your site to come back later. Many thanks

  • Reply furtdsolinopv 5th Nov 2018 at 3:34 pm

    Have you ever considered writing an e-book or guest authoring on other websites? I have a blog based on the same ideas you discuss and would really like to have you share some stories/information. I know my visitors would enjoy your work. If you are even remotely interested, feel free to send me an e mail.

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