Follow, follow, follow… follow the leader… You are probably singing in tune to this popular rhyme that was an integral part of the formative years for most of us.
Albeit that was the origin of most personal finance problems. The ingrained belief that there is a leader while the rest stand as followers. To this day the majority of young people can not make independent decisions about their finances.
Your choices are shaped by whoever finds themselves in the position of the leader. The car you drive, where you shop, or even simple things like buying a mazhanje (also known as “wild loquat”) are influenced by whether the next person will approve.
The high levels of debt, criminal activities, and lifestyle challenges stem directly from this lack of personal finance leadership.
What Is Personal Finance Leadership?
The term leadership is commonly associated with organisational settings. However, it does have some application at a more personal level.
Leadership is that process in which one person sets the purpose or direction for one or more other persons and gets them to move along together with him or her and with each other in that direction with competence and full commitment.”Jaques E. & Clement, S.D. ‘Executive Leadership: a practical guide to managing complexity’ Cambridge, MA: Carson-Hall & Co. Publishers (1994, p.4)
Using this definition of leadership in a personal finance context,
- Leadership is that process in which one person – you.
- Sets the purpose or direction for one or more other persons – your personal finance goals.
- Get them to move along together with him or her in that’s direction – get your money to work for you.
- With competence and full commitment – living your best life financially and leaving a legacy for the next generation.
Why Should You Be The Leader Of Your Personal Finances?
Humans are typically self-serving individuals. A 17th-century philosopher, Thomas Hobbes, argued that people would kill each other if they thought it would help them and he wasn’t wrong.
Even those who consider themselves kind-hearted and helpful, usually give just to get in front of the camera. I don’t mean to cast a black shadow on human nature, but the point of this line of thought is to show that no other individual will lead you in the right direction besides yourself.
If you don’t take leadership of your finances no one else will. Even those who purport to help you have a hidden personal agenda. Clearly, being the leader of your personal finances will set your life on track to living a more fulfilling life.
That being said, it brings to the fore the question of why so many people leave the leadership of their personal finances to external forces. The simple truth is; it’s easier to pass the responsibility to someone else. If you fail you can always find someone to blame.
Then there is the follow the leader mentality. We give pseudo leadership positions to celebrities, the thought leaders, church leaders, and whoever else we admire. In the end, we follow, sometimes blindly, whatever the leader does.
The clothes that you wear are a result of someone else’s fashion decisions. The kitchen you built was probably influenced by some Pinterest pin. The furniture you own follows the trend of the day. I could go on with examples of how following the leader influences our money spending decisions.
The problem then arises when people find themselves in debt or living from hand to mouth trying to follow the leader. Most overspending and living outside of means can be controlled once you take back the reigns of your finances.
How To Take Back The Reigns Of Your Finances?
A key concept of leadership is planning. It’s common for company leaders to go on retreats at the end of the year to map out strategies. The same applies to your personal finances. Set aside time to plan, this is the first step to being a personal finance leader.
Set up strategic objectives. What do you want to achieve in 5, 10, or 20 years? When are you going to retire?
Have clear goals of how you plan to achieve your objectives. Are you going to start a business? How much money do you intend to make over a certain period of time? Taking each day as it comes is the surest way to fail as a leader.
As my school principal would say, ask yourself, “Who am I? Where am I going? How do I get there?”
For your plan to work, it has to be actionable. A budget helps you break down your goals into clearly measurable steps. How much are you going to spend each month? On what?
These specifics will help you not only to curb your spending but to determine what you use your money on. If you stick to your budget, then there are fewer chances of you being tossed around with the winds of change. As a leader, you have to remain focused and disciplined.
Imagine what would become of any corporate if the leadership decided to change products and follow what the next person is doing every other day? Absolute mayhem and guaranteed failure. This is what not sticking to a budget does to your personal finances.
3. Ask, ask, and ask some more
The only way to be a good leader is to acknowledge that you don’t know it all. Seek advice as much as you can. Ask the experts, let Google be your best friend, and absorb as much information as you can.
Sift through information to find what works for you. As a leader its folly to jump on every bandwagon.
Unconsciously we have become a sum total of what we have been taught as children. We follow the leader, we act only when Simon says.
We have trained our minds that the leader is always someone else. To take charge of your personal finance, relinquish the position of whomever you have named leader.
Become the leader and Chief Finance Officer of your life.
Manage your money wisely, your future depends on it!