In our first post, we welcomed you to the inauguration of The Clever African. The journey we are about to embark on will be beneficial in bringing you to a better understanding of personal finance. Throughout the year, we will immerse you into essential financial concepts that will prepare you to be a clever African. The first series of our blog will teach you how to build a solid financial foundation.
The wise man builds his house on solid rock while the foolish man builds on sand. Building your blueprint on a firm foundation is what will pave the way for financial success. Many people believe that a firm foundation is solely earning a high salary. Income is not the only variable in the construction of a successful financial blueprint as you will see in the following illustration.
Tracy and Jordan graduated with the same degree, entered into similar career paths, and earned comparable salaries which allowed them to live comfortable lives. Tracy lived in a large house, often recycled extravagant vehicles, and had an affinity for the latest and greatest when it came to the fashion of gadgets. Jordan lived in an average sized home, maintained one vehicle, and held a conservative spending view when it came to the latest trends. Jordan had laid some boundaries for his expenditures, established attainable goals, and lived by the principle that “all things are permissible, but not all things are beneficial”.
By the time these two reached mid-career, Tracy was in serious debt, had a pending foreclosure and his financial troubles were creeping into his marriage and family life. Jordan was debt free, had thousands in his savings account, saw exponential growth in his investments, had sufficient funds to retire securely, and was able to remove the chokehold of student loans from his children as they entered into college. These two had the same education, same income, but a vastly different outcome. What was the difference? It is clear that one had a blueprint and the other did not.
Unfortunately, many people do not know what a financial blueprint is and in turn do not have a plan for financial success (Take a look at the figure to the below). It is clear from the above case study that Jordan’s preparation is what would constitute a financial blueprint. This blueprint consisted of planning, accountability, and self-discipline. Just as an architect would create theoretical drawings before practical construction, in the same way, we are to have a thoughtful plan before carelessly dispensing our income. A financial blueprint can be simplified as a financial plan of action. The chaos and confusion that would arise from constructing a physical building without a design is the same turmoil that occurs in our personal lives when we live without a financial strategy. Understanding this concept should persuade one to establish and execute their own personal blueprint.
The financial blueprint, for the Clever African, is a complete 7 Step foundational plan used to manage, grow, and secure financial success:
- Giving back
This blueprint, if properly applied- will bear the fruits of a rewarding and fulfilling life. But before these fruits can be enjoyed, the seeds must be planted. The theme for this quarter is “What is your Financial Blueprint”. Over the next few weeks, we will be addressing each of these 7 cornerstones in an in-depth manner. Plant, water, and watch the growth. Your financial future starts with the planting of a seed- the establishment of your personal financial blueprint.