7 Money Secrets You Need to Know

1. Salary isn't the Whole Story

Going up the corporate ladder can only get you so far. You will reach your earning potential then your rising curve will flatten. What you might not know is that making your money work hard for you is key to growing your wealth not you working very hard for money. 

Generating income from passive, rather than active, income sources is the best way to do this. For those who do not know the difference between the two incomes, I will define them. 

Active income is income you earn after working like the normal 9-5 job. Passive income is income you get because of investing your money. Examples of Investments that yield a passive income are rental properties, dividend-paying securities, profits gotten from a business you don’t directly run on a daily basis, even royalties received on creative work or inventions.

Is there a worse feeling than to work in a job you despise but you cannot quit because you really need the salary? In such a job days would become so long to feel like years and life would be so miserable if not even meaningless. 

You don’t have to be at the mercy of a job. Take things into your own hands. Develop the skills you need to invest and earn passively

2. Take Advantage of Time, not Timing 

Stop thinking you can sell everything before a stock market crash.
Occasionally, you may hear guys claiming they might sell when the market is about to crash. But the question is how do they know for sure that a crash is coming? A crash is a crash only when it is obvious. And it will obviously be too late by then. This to me is overconfidence in disguise. What we know is that most predictions seldom come true. The price that comes with timing crashes is that you will get it wrong and will suffer lower returns. 

No one has the power to foretell how the market will behave tomorrow. The wealthy know this fact and make zero attempts to carry themselves as day traders. They, however, realize that time and compounded returns are the most essential factors in growing wealth.

As counterintuitive as it might seem, growing your wealth requires you as an investor to embrace a buy-and-hold strategy, stay put, ride out any fluctuations in the market and ignore speculation. 

3. Investing is the Opposite of Gambling

What’s the difference you may ask? 

Well, when you are talking about Investing you would be referring to a decision made on a logical and sound assessment of possibilities. On the other hand, gambling involves taking a swing at chance and riding with it. An investor pours money when he reasonably believes the odds are in his favour. A gambler will bet their money without caring whether the odds favour him or not and hopes it’s his lucky day.

There is a fine line between the two and It’s easy to relate investing to gambling because in both cases most people lose money. There is a tendency to blame external factors instead of blaming ourselves when things don’t go as planned. We blame the markets claiming they are rigged the same way casinos have an edge over the gamblers. This is why we lose.

You need to do your research before investing in the stock market. The stock market becomes a casino only if you are not well informed.

4. The Road to Financial Freedom Is Long and You Are Your Only Competition

A lot of people think the wealthy live lavish lifestyles. While some of them do, plenty of them attained their status living frugally and investing their incomes. 

It’s difficult to avoid the temptation to live beyond your means, but it's important that you resist. If you don’t, could slowly crawl into a debt cycle, which may limit your ability to save.

Create a budget if you don’t have one and try to save at least 20% of your earnings whenever possible. If you get some more income then increase your savings even further and make effort to pay down your debt if you have one. 

5. Time is Your Most Valuable Currency

The most valuable asset you have when it comes to investing is time. The earlier you start investing the more value for money you get than when you start contributing later on. This is all attributed to compound interest.

The first few times you just earn interest on your initial contributions but with time, you will start earning interest on your interest and this will help your funds grow much faster. 

Let's explain this a little deeper using figures.

Say you are 24. If you made an investment that gives you a rate of 7% per annum and your initial investment was 10,000. At 64 years you would have Ksh149,744. If you wait 10 years to start doing it you would have Ksh76,122.

However small your contributions are, they could still accumulate into a large figure over time, so it's better to start investing now rather than later. If possible, automate your transactions so that you will not have to do it physically yourself.

6. It's Best not to do it alone

The rich are not always vast with matters of finances or investing, but they value expert advice from a professional. A lot of people will forego the cost of hiring a financial manager but the wealthy realize that with the help of a financial advisor their wealth could grow at a greater rate.

Financial advisors suggest investments and strategies you had not thought about to achieve your goals sooner.

While some people might cringe at the cost of hiring a financial adviser to manage their money, the wealthy understand that, with an adviser's help, their money could grow faster than it would if they were managing it on their own.

Wealth seldom grows overnight, but if you are responsible with your funds, seeking out newer and other sources of income, and seeking help when you require it, you will steadily grow your worth over time.

7. Understand Your Assets & Liabilities‍

Assets bring in money while liabilities take money away from you. So you have to find a way to turn those liabilities into assets. Take your house for example; it is a liability when you are paying the mortgage and any extra cost that comes with purchasing a house. But you can turn it into an asset by putting it up for rent to give you additional income