I have been a victim of this so many times its almost ridiculous. Ok so I figured out early that being cash rich doesn't mean always having cash to spend whenever you wanted to. I always thought being able to buy what you want when you wanted it was the way to go. The only thing was I didn't quite understand how to keep the habit going. I’m not talking about being ostentatious but I believe in being able to buy what you need and even want whenever you need and want it. If you can’t do that, you’re broke and it doesn't matter how much you make.
Let me explain.
I keep saying that I am not interested in those who ‘seem’ wealthy, but those who ‘are’ wealthy. I don’t think enough people know the difference and that’s why we get into serious trouble. All you need to do is watch a few episodes of ‘American Greed’ to understand that being cash rich is important to everyone and some people aren’t afraid to go to the deep end to get it.
I’ve always known I would want a lifestyle where I could just walk into a store and not automatically gravitate to the sales rack but just walk to the area I wanted, point out something and take it over to the cash register knowing that I could pay for it, even if I didn’t have the time to look at the price tag. Those who seem wealthy will have no issues diving into the sales rack and almost exchanging punches over a pair of shoes at half price but those who are wealthy appreciate a good deal,, but know they can afford it whenever they need it anyway? So then I came to the conclusion that the rich are first rich in the mind and then the dividends of their mindset begins to show in time. That’s what it means to become rich. You must ‘become’, you cannot just ‘be’.
Anyway, I knew something was wrong when I always had cash but I was always back to zero really quickly. It was like clockwork, make money, get money, spend money, no money, in that order. Now I was very resourceful in school but I quickly discovered that there was something wrong with the way I handled money. From my experience, these are 4 don’ts with your money as a young person:
Don't forget to save. If I had saved even a tenth of my pocket money every semester and then saved another tenth of all the money I made from part time jobs and my small scale retail business, I would have graduated with enough to buy at least three plots of land in a choice area. In retrospect, buying that black skirt for that event was really not necessary. I would still have looked just as good in jeans.
Don't get carried away by responsibilities. Yeah, I said it. Sometimes, there are issues that need sorting out. Most times you are made to feel you are the only one on the face of the earth that can make it happen. So you go ahead and put in everything you have to fix the ten inch hole in the fence, pay for your brothers Anatomy book when there are fifty copies in the library and pay for your the new TV in your mothers shop that no one watches and you forget that the savings are also your secret weapon. If you prioritise the problems that need solving keeping in mind that there is only a certain amount of money available to sort them out, you will be amazed that the world will not stop rotating. I’m not saying shirk them, I'm saying be wise about taking them on.
Don't despise the days of humble beginnings but make sure you don’t stay there. If I had grown my retail line consistently over time, I would be talking in terms of chains of stores which I could have sold to a bigger chain eventually even if I was no longer interested in merchandising and sales. As I said, as it came in, it went out, capital, profits, everything so each time I started, I was starting from scratch. Not a good way to go. So in the real sense while people looked at me as resourceful and business savvy, I was just living from hand to mouth.
Don't spend more than you make. It seems like an obvious statement but you would be surpsired how many people do this on the regular. So many people spend their entire December bonus including their basic salary in June. Please there is nothing normal about buying stuff and paying over a 6 month period. It is not a sign of civilisation. It is madness! Don’t do it. If you can afford it, buy it; if you can’t, don’t. If you can’t live without it, then find a way to increase your earning power. Whatever you do, always spend significantly less than you make.
So what do we need to do? I say
we because I am still in money reform school myself and I learn more and more every
day. So from me to you and back to me again. The first step - Just start.
Save something. It doesn’t matter
how small it is, you will never go far in life if you don’t develop the culture
of saving. Trust me on this one.
Why should I save? Money is meant
to be spent anyway; Why would I work so hard to earn it and then go all out to
save it when I haven’t even enjoyed the fruits of my labour?
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Well. Tough. Its either you
believe in saving and investing or you don’t. If you do, these are the two main
reasons why.
Emergencies: I didn’t get to know about this until very recently and
it was an awesome eye opener. A savings account should be split between an
emergency account and a general saving/investment account. Open a savings account
with a reputable bank and initiate a standing order to have a certain amount
deducted from your current account every month. If your income is not regular
then you‘ll have to eat the frog and just make the transfer yourself once you
get paid. This should be an account that is not readily accessible (ATM,
Cheques e.t.c) but accessible enough to be withdrawn on short notice. An emergency
account should contain a total of about 6 to 24 months of your household
expenditure which would ensure that your standard of living does not drop
automatically in times of crisis. This would of course mean you need to know
exactly how much you spend in a month. Don’t assume you know, write it down and
note everything you spend on from taxi fares to a bottle of coke. Once you see
in black and white exactly how much you spend you have more control over your
life. In other words, you are saving in this account because you want to have
an immediate cash resource in cases of job loss, accidents, unprecedented time
off work, family issues, etc. Why is this important? Two words, THINGS HAPPEN. No
matter how well you plan and how many options you create for yourself; there
will always be circumstances beyond your control. You can count on it. So if
you can’t stop them from happening, you should at least try and keep your feet
firmly on the ground to brave the storm whenever it comes. Enough said.
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Dreams: The second portion of savings should be put in what a lot
of pundits would like to call a dream account. In other words, this should be a
savings cum investment account. Here, a certain percentage of your income will
be channelled to fund your dreams. Dreams could be a Harvard education, a
luxury home, a property portfolio, an education trust for the children, etc. It
may seem silly considering that the bills are always sky high but you would be surprised
how much easier it is to keep your dreams alive when you set a little something
aside to keep it going. By the way have you ever heard that opportunities
always come the way of those who prepare for them? Yea, that’s the point.
Prepare. It doesn’t matter if what you are saving is 5,000 naira a month for a
10 million naira dream. If you are faithful in little, you will be comfortable
with much. This account is slightly different from the emergency account
because it is designed as a stop gap, not a final destination. It is from this
account that you set a target and invest once the target is reached. For
instance, you can decide to save 10,000 naira every month till you save 500,000
naira after which you buy a plot of land on the outskirts of town which you
will resell and then turn over the cash to buy a more expensive property over
time. Remember that these two accounts should be separate savings accounts with
limited access.
If you are able to practice these
consistently over time; Congratulations! You are well on your way to officially
mastering your money! Good luck to us
all!!
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