Knowledge is Key to Success

Before you invest in anything, learn all you can about it. In our attempts to improve our personal circumstances, we always look at the lifestyles of people who appear successful for clues. However, sometimes appearances can be misleading and some long-held beliefs are completely different from reality. Having a clear view of reality can save you years of running around without achieving a thing. This is not easy because the road to success is full of myths.

Myth 1: The more materials possessions you have and the more lavish your spending, the better off you are.

The flamboyant, attention-grabbing ways of pseudo-rich fools many of us to the true spending habits of the genuinely prosperous. They have an ever-glowing fleet of luxury cars and an amazing generous disposition but few invested assets. Many of the people driving around in luxurious cars have a negative net worth, that is, they owe more than they own. Leading such a lifestyle is just like walking on the edge of a financial cliff. Genuinely affluent people concentrate on true prosperity and security, not conspicuous spending. They spend more on appreciating investments for their families’ future security.

Myth 2: Owning a business is the only route to financial success.

Successful entrepreneurs are held in high esteem and many people strive to be like them. However, their high profile overshadows the stark realities of starting a business-a difficult, stressful and risky undertaking. Every success story has scores of failures. Statistics indicate that about ninety per cent of all new businesses collapse within the first five years, with the owner losing his/her capital. The majority of these failures are attributed to inadequate capital and poor management. Prospective entrepreneurs should, therefore, be aware of these pitfalls and increase their chances of success by doing all they can to be strong in these areas. A well thought-out business plan should show how much you need in terms of capital. Chances of success are much higher when a business is properly funded. Chances of success will also be higher if one enters a business in which she/he has some knowledge and experience, even as an employee.

Myth 3: Having a high income makes you financially secure.

People mistake high income with security. A high income only makes it easier to become financially secure. To be secure, you have to plan and sacrifice. While it is important to try and increase your income, what is even more important is what to do with your current income. How much of it you save and invest. Financial security comes from owning investments, coupled with managing of risks of loss through the appropriate insurance. Even as you enjoy a reasonable standard of living today, ensure you spend less than you have and use savings to acquire assets. This is the only viable road to financial independence.

Myth 4: It is Impossible to save.

Saving is not easy, but it is easier than living in difficult financial circumstances, which is inevitable if you do not save. The following steps will keep you on track:

1) focus on your goal; if in future you want to buy a house, internalize the fact that your dream will only come true if you save. Think of every month’s contribution as another piece of your house. Don’t let feelings of despair and hopelessness overcome you. Remind yourself of this dream daily with the help of a picture, or drive around it everyday if it happens to be on your way to work.

2) Cut down wasteful expenditure; sometimes we waste money, which makes savings even more difficult. Buying insurance that is more appropriate for sales agent needs and that of the company than your need for protection is something else to look out for.

3) Pay yourself first; what do your pension fund, the cooperative society share contribution, car loan, mortgage have in common? They are deducted from your pay before you touch it. That’s why you can meet the payments over long periods of time. Do the same with your savings; effect a standing order with your bank to send a regular amount to your stock broker or savings account. Reading personal finance books can give you enough to make better decisions about money issues.