Financial struggle is one of the major factors that cause stress. Having money is not the same as being financially free. This is evident to the fact that too many rich people die of stress related disease/sickness. So how then can you fight stress through financial independence? Knowing that; money is not an end but a means to an end.
Having good money management skill is the key to financial independence and freedom. Nobody is born with money management skill, we all learnt it and you too can learn it. The following paragraphs will explain the terms you need to master to become financially independent and free through harnessing the power of money mgt skills.
- Time value of money. The number one term that you need to be at home with is ‘time value of money’. Know the meaning of this concept and apply it in your quest for financial freedom. Apply it to your daily life activity that has any financial involvement. You will become a good manager if you understand that One Naira (1N) today is not the same as One Naira (N) tomorrow. Inflation is the number one factor responsible for this. Good financial managers do every thing within the ambit of the law to ensure that one Naira they have today brings in returns that is at least equal to the inflationary rate, to preserve the purchasing power of the money. This will smoothly translate us into the discussion of the next money management skill needed in today’s world.
- Investment Appraisal/Decision. Masters in the art of money management understands the rudiments of investment analysis. They discount the future streams of cash flows from any particular proposal to determine its worthwhile-ness/ attractiveness. Some of the techniques they employ are: NPV (Net Present value), IRR (Internal rate of Return, PI (Profitability Index), ROI/ ROCE (Return on Investment / Return on Capital Employed), Payback period (this can be discounted or non-discounted), ARR (Accounting rate of Return), etc . of all these, the NPV has been preferred over others for good reasons. You may not need to be advanced in these techniques but working knowledge of them will do you and your finances a whole lot of good.
- Ratio Analysis and Financial statement interpretation. If you really want to be financially free, you have to be friendly with figures or get people that will do it for you. (You can contact me if you wish, laugh!) a lot of vital information are hidden in company’s financial statements. You only get them when you analyse the financial statement.
The acquisition of the above skills (technical perhaps) will make you be open with your money matters. You see a lot of people tend to shy away from matters they are not comfortable with and often time, die in silence. And am sure you know what follows – emotional and psychological trauma- which is a super high way to stress-FUL life. The acquisition of the money management skill will also make you learn to make your money work for you and in a safe place too.
Research has shown that it brings more joy to give than to receive. When you are a master in the money management business, you become financially free. And when you become financially free, you start thinking of how to give back to the society. And you will agree with me that giving back to the society brings true joy and lasting peace of mind that will eventually translate into happiness – which are all cumulatively = TOTAL CURE FOR STRESS.
If you need clarification in any of those financial management skills, kindly post your question on this forum. To your financial freedom and stress free life!