How to Make Your Money Work For You: Practical Steps by Waithaka Gatumia

In today’s economy, understanding how to make money work for you is crucial for financial independence and growth. Waithaka Gatumia, CEO of Centonomy, breaks down the core principles into four actionable steps, emphasizing that financial success isn’t just about earning, but about strategic management and mindset.

1. Prioritize Increasing Your Income

Your income is the foundation of your financial potential. To truly make your money work for you, consider these strategies:

• Become Indispensable in Your Current Role: Instead of merely complaining about your salary, focus on becoming more valuable to your employer. Take on additional responsibilities and strive for excellence to merit a raise or promotion.
• Explore Supplemental Income Streams: If your primary income isn’t sufficient, look for additional avenues. Even unused assets, like a piece of land, can be leveraged to generate extra cash, however small the amount. The key is to actively seek ways to grow your earnings.

2. Cultivate the Habit of Paying Yourself First

This is a fundamental shift in financial thinking designed to help you make your money work for you consistently.

• Automate Savings and Investments: Before allocating funds to any other expense—be it bills, taxes, or family—make it a non-negotiable habit to set aside money for your savings and investments.
• Ensure Consistent Growth: By paying yourself first, you guarantee that funds are always available for future growth, preventing the common issue of having “nothing left” after covering all other expenses.

3. Diligently Track Your Spending

You cannot effectively manage what you don’t understand. To make your money work for you, you must know where it’s going:

• Gain Clarity on Expenditures: Many people are unaware of their exact spending patterns. Take the time to meticulously track every penny to understand your cash flow.
• Identify and Eliminate Waste: Once you see your spending habits clearly, you can identify and “plug the holes” in your budget, eliminating unnecessary expenditures that drain your resources.

4. Strategically Focus on Acquiring Assets

This is perhaps the most powerful way to make your money work for you. Prioritize investments that bring money into your pocket.

• Define an Asset: An asset is anything you own that either generates income, appreciates in value (capital gains), or at least maintains its value.
• Invest Smartly: For example, instead of buying a TV that costs you money, invest that amount into something that will earn returns. Over time, that investment could generate enough to cover the cost of the TV, or even allow you to borrow against it.
• Creative Asset Utilization: Even unconventional items can become assets if used to generate income. The speaker mentions young people using a PlayStation to run a small business by charging others to play.
• Consider Savings and Real Estate: A savings account, while offering modest returns, typically maintains its value against inflation. Similarly, undeveloped land can appreciate in value, but its full potential as an asset is unlocked when you find ways to generate income from it.

Understanding Debt: Good vs. Bad

According to Waithaka Gatumia, CEO of Centonomy, debt can either hinder or help you make your money work for you:

• Good Debt: This is debt taken on to acquire an asset that will generate income or a return over time.
• Bad Debt (Consumption): This type of debt is used for consumption, where the borrowed money goes towards items that depreciate in value and incur additional costs (e.g., interest, maintenance, fuel for a personal car).