Author: Arese Ugwu
Genre: Personal Finance
||How I came across the book
For some reasons, many people seemed to be talking a lot about this book and I became curious. Then one day someone shared it in one of my online groups, and I literally jumped at it.
As an intending millionaire, I wanted to know the choices that make a woman financially smart.
Most of the lessons shared in this book are profound. I especially love the definition of the smart money woman.
The smart money woman is a woman whose hustle has purpose and has learnt to make money, keep money and grow money.
She is a woman who has found her calling in life, something that matches her passion with her skill set and, regardless of where she is in that process, she is excited and confident that she will make money because she has positioned herself for success and she knows this is where she can maximize her earning potential.
– In general, as African women, we are not taught in any formal framework how to keep money or grow it—basic personal finance skills are difficult to learn.
– Even when a young adult starts earning more than they need to survive, they end up living from paycheque to paychequebecause they think about their incomes largely in terms of spending and haven’t learned how to save or build assets in proportion to what they earn.
- Being Broke vs Building Wealth:
Broke means, if you lose your primary source of income today, you will not be able to maintain the lifestyle you have become accustomed to because you have no assets to rely on.
– We must dismiss this idea that we will always make more money. We have a finite amount of productive years to work; many people will never be as agile both mentally and physically as they are now.
– Building wealth is more about how much you keep than how much you spend.
– Broke people and rich people approach the same amount of money differently. They understand the relationship between how we earn and how we spend and they know where the balance is.
– Developing a wealthy mind-set requires the understanding of the concept that the way you spend, invest, and manage ten naira is the way you’ll spend, invest, and manage ten million.
- Active vs Passive Income:
– Active income is the income you get from services rendered, it is usually your income from your job or business.
– Passive income in simple terms is money that you make while you are sleeping.
Financial Freedom is when your passive income exceeds your expenses.
– Ideally, the goal is to get to a point where the assets you’ve accumulated can pay you enough of an income to pay for your lifestyle.
– Your net-worth is your assets minus your liabilities and it gives you a snapshot of where you stand financially.
If you don’t treat the money you earn with respect, it will leave you with no respect.
– By separating your spendings into wants and needs, you limit your wants and prioritise your needs.
- The Principle of borrowing and repaying debts:
– Debt can be a tool to attain financial success but how you use it matters.
– Wealthy people use debt as a tool to leverage their investments and grow their cash flow, but poor people use debt to buy things that make rich people richer.
– Only borrow to acquire an asset that will appreciate in value.
– Prioritize your debts. Decide which ones are most important. This depends on your particular situation—you could slay the largest debt first to give you more confidence that the rest are manageable, or you could decide it is best to start with the debt charged with the highest interest rate, so the debt does not increase.
– Set deadlines for each loan. There should be an estimate of how long it is going to take you to pay off each debt.
– Think about the triggers that led you into debt in the first place and try to eliminate them. There’s no point getting out of debt only to dive back in.
- On Savings, Investments and Budgeting:
– We have to learn to spend with intention by allocating our resources to reflect the lifestyle we want and are able to sustainably afford.
– A smart woman doesn’t wait for financial surprises; she systematically saves toward her emergency fund because she knows that this is the foundation of her financial journey.
– Before you splurge make sure you have at least six to nine months of living expenses saved up for emergencies.
Calculate how much you would need to survive if you lost your job or income from your business. What do your living expenses add up to each month? Multiply that by six or nine months.
– Emergency fund are liquidity and safety, not return, so do not take risks with your Emergency fund to earn more or sacrifice liquidity.
– Money in the bank is equal to spending. It doesn’t matter whether you earn ten thousand or ten million naira a month.
– As regards investments, start with high savings accounts or money market accounts that preserve your capital and give you a reasonable return.
– Your investment goals should reflect your financial obligations, what you value most, and what you want the money you make to be able to do for your life in general.
– The cardinal rule when you invest is, don’t invest in anything you don’t understand.
– People associate the word “budget” with scarcity or a reduction in station of life. Therefore, “budget” is a word they come to resent.
– The reality is, a budget is something that tells you how to allocate your resources and it should reflect what you value.
– The reason most people live paycheque to paycheque is because they don’t have a full understanding of what their income can support.
- On Making Profit, Solving problems and Fulfilling purpose:
– The most successful people are the ones who are able to articulate what they want for their lives. Success is deeply rooted in having a solid plan that is tailored to what you want.
– The more people you are able to reach and influence, the more likely you are to attract new business, gain access to partnerships or raise funding for your business.
– To make profit your idea must either be generating more revenue for your company or reducing costs.
– Nine out of ten times when people ask how they can make more money the answer is find your purpose.
Your purpose is your calling; the thing that drives you to be successful because it is what you were created to do.
– Passion is that idea that burns deep inside you, so much so that you can’t stop thinking about it until you execute.
– Skill-set are things that you are good at, either because it’s what you’ve studied or something you’ve spent hours honing.
– Your idea has to solve a problem people are willing to pay for.
– It is important for people to understand purpose because, they often pursue an idea and then can’t follow through on because they haven’t thought through these three questions:
1) Is it big enough (Impact)?
2) Are you in a unique position to make it happen (Skills/Resources)?
3) Are you passionate enough about it (Does it pass the sleepless night test)?
- On Paid Jobs vs Entrepreneurship:
– In order to maximise your earning power and have the ability to invest, you need to pursue a career you are passionate about and create multiple streams of income.
– This does not necessarily mean you have to become an entrepreneur.
– The reality is, not everyone is cutout to be their own boss and you need to learn this early on.
– With entrepreneurship growing in global popularity, everyone wants to be a boss. A good proportion of those already on the corporate ladder can’t wait to jump off and start a business so that they too can escape.
– You shouldn’t be thinking about a “me too” copy and paste approach because the idea of working for yourself sounds appealing.
Being a boss is not all about working for yourself and avoiding the discipline of a nine-to-five. Becoming your own boss means you are responsible for an enterprise and beyond the idea—a successful enterprise has to have structure, a business model and a value proposition.
If we all become our own bosses who is going to work for whom? Who will be the employees?
– Ideas are a dime a dozen; execution and the ability to solve a series of problems is the actual key to success.
– People who are entrepreneurial in their thinking are value-driven. They adopt critical thinking and embrace innovation and continuous improvement.
– They are the ones you see solving problems every day and are getting paid to do so regardless of whether they are the founders of the company or not.
– The thought process should be, what skills or resources do I have to execute that idea? Am I passionate enough about it to pursue it and follow through?
– Instead of over-glamorizing either end of the spectrum, let’s focus on encouraging people to be value-driven, solve problems where they are and focus on finding career paths that suit their skill-set and temperament so they can thrive.
What makes us wealthy is not how much we earn but how we can systematically use a proportion of the income we earnto build assets that pay us over time.
The smart money woman would rather live like a princess forever than live like a queen for a few years. Ultimately, improving her net worth is more important than upgrading her wardrobe. This mind set helps her reason when she’s spending.
I actually enjoyed the book being partly fiction although the characters seemed way out of my league as per their earnings.
While this book made a fine read, the element of faith which is a priority for me, would have given a more balanced approach.
This is a practical book for every young woman who dreams of becoming financially established someday.