Personal financial management is the ability to take control of your money using various instruments like a budget and a wealth planner to steer your finances towards your present and long-term needs and goals. Your ability to manage your finances determines how good you are at making healthy decisions that grow your wealth, prevent loss of value, while avoiding bad decisions that have the power to leave you financially crippled.  

In other words, important life goals like owning a home or simply enjoying the peace and stability that comes with positive financial habits become at risk when you don’t understand or apply proper wealth management. Therefore, at whatever stage you decide, mastering these personal finance lessons will go a long way: 

Budget to live within your means  
The first lesson to learn in personal finance is self-discipline. Spending more than you earn is a clear sign of poor financial management and making it a habit will eventually result in deep-seated debt. Financial maturity calls for developing a budget that reflects a realistic allocation of what you earn to the essential monthly expenses and savings toward investments and other future goals.  

Interested in learning how to allocate your budget, check out these tips: Must-Items on Your Budget.  

Set clear financial goals  
In his book, I Will Teach You How to Be Rich, personal finance guru Ramit Sethi, encourages readers to determine what their rich life is. The idea is that by determining the kind of life you want, you can begin aligning your finances; the way you earn, spend, save and invest, according to your personal values.  

Your income will change and grow at different stages of your life, but your values won’t. That’s why it’s important to project which goals reflect your values and at which stages short-term, mid-term or long-term you will achieve them. Once you have spent time reflecting, write them down!  

Tip: Transferring your goals to a physical or digital journal will help you be accountable and keep track of your journey. Use the acronym SMART to craft your financial goals: Specific, Measurable, Achievable, Relevant and Time-bound goals.  

Save a percentage of your income  
Saving a percentage of everything you earn is the one habit that will unlock greater financial capability. Everything you spend from your income is money you are handing over to others: paying rent, bills, food expenses etc. Savings are what you pay yourself.  

This is key, because your savings can be allocated to your personal goals and desires. For example, planning for a holiday or building your home or even long-term goals like retirement which according to experts amounts to 25x your annual expenditure.  

Tip: Starting off with small amounts and building your way to saving between 20% - 50% of your income is what personal financial expert Monica Kasirye Kavuma, recommends.  

Plan for the Unexpected 
The next stage of maturity in your financial management journey is learning to address your blind spots. Occurrences like health emergencies, loss of property, or even death are all scenarios that catch us off our guard. But while they are unexpected at the moment, it is no surprise that they occur at all.  

Allocate some of your savings to deal with the unexpected through structures like an emergency fund, different types of insurance and making proper arrangements ahead of time, including preparing a will in case of death. 

 Tip: Build an emergency fund that amounts to 6 months of your monthly expenses. This will cater to any emergencies like loss of job, or health or otherwise.  

Stay on top of Debt 
A troubling trend among adults in Africa is the habit of acquiring debt for personal use. This is quickly producing dependency on money that is not easily repayable. One way to know you can take on debt is understanding whether the benefits outweigh the costs.  

Faith Adesemowo, CEO of Social Lender, encourages people to determine whether what is acquired in debt will produce economic value at a faster rate than what is paid out in interest fees. Such debt like financing a profitable business can help you grow instead of steep you in long-term financial crisis.  

Tip: Keep your debt-to-income ratio below 20%.   

Start Investing Early 
While saving unlocks financial capability, investing will speed up the rate at which your money works for itself. Think about investing like planting a field, which will produce more plants that bear fruit with more seed to plant. The more you invest, the more you produce. The idea behind this is investment compounds. Albert Einstein termed compounding interest the 8th Wonder of the World.  

Tip: Start early with safe investments and build your capacity to invest consistently will ensure that your money is compounding until its profits are doing more work than your principal investment.  

Learn how to build wealth 
Throughout your financial journey cultivating a habit of reading and building financial literacy, business and investment knowledge will help you make the right financial decisions. You will learn that building wealth is less about chasing money and more about being able to play the game. With new technologies on the rise in the world of finance, gaining a broad picture of the world and the opportunities available will provide additional advantages in your journey to achieve your goals.  

When it comes to gaining experience, financial literacy expert of the Epokothweni podcast Babalwa Nonkenge encourages her listeners to take a gradual approach to growing wealth. Starting the habit of saving regularly and making low-risk investments in safe and regulated fund operators will ensure that your “classroom” fees in the world of investment are not hard-earned.  

Tip: Time is your biggest investment. Learning high-demand skills, improving your network, your experiences, and the value you offer will open doors to building wealth and not gambling it. 

Avoid Lifestyle Creep 
At some point in your financial journey, all your hard work and diligence will begin to pay off. At that point you might be tempted to increase spending as fast as you earn on wants and not needs. This is called lifestyle creep.  
Not losing sight of your essential needs, your financial goals and values can help curb wasteful expenditure and promote spending on what you value.  

Tip: Budget for your wants. Allocate a percentage of resources to the things that will bring you both personal value and pleasure without letting your spending get out of hand.