Every time we spend money, we are making a choice whether we are aware of it or not. Each choice takes us down a certain road or destination. Each spending choice we make has financial consequences, either now or further down the road. Most people are not aware of this fact, hence they do not take time to think through those spending choices and weigh the financial consequences to see if they are heading the right direction or moving towards the desired consequence. According to Rich Dad (in Rich Dad, Poor Dad by Robert Kiyosaki), with every dollar we spend, we make the choice to remain poor, middle class or become rich. This means we are voting each time we spend, we are voting for an outcome.
We spend according to our money reflex, money habits, feelings and emotions. We are hardly aware at the conscious level that a transaction is taking place, a choice is being made and consequences are sure to follow. There is a consequence for every choice we make. Some refer to it as Law of Consequences or Law of Sowing and Reaping. You cannot break this law no matter how highly connected you are, nor get a waiver because of ignorance. You cannot sow bad seeds and pray for crop failure. Each seed will germinate and bear fruits according to its kind. It is a trap many have fallen into without being aware.
Most of us think in the short term. We are only concerned about the here and now. The reality is that most consequences show up further down the road. They hardly manifest immediately. Very often, we are not aware what the consequences of our actions are, hence when they show up we are unable to link it to actions we took in times past. That time delay between actions and consequences makes us feel we have gotten away with our financial recklessness whereas the consequences are waiting for us down the road. This is the main reason we do not consider the consequences when we take actions. It is very easy to fall into this trap, when we make dumb choices and seem to get away with it. When the consequence is not swift, we tend to continue doing the wrong things.
When I was in secondary school up to when I started working after graduating from the University, I was always having issues with peeling palms. The skin of my palms was always peeling off. I did not link it to the detergent I was using to do my laundry. This went on for years and years until I became aware that my palms were reacting to the detergent. The moment I linked the effect to the cause, I changed the detergent I was using and my palms have stopped peeling since then. Until we link our current financial situation to the way we handled money in the past, we may not be motivated to change our money habits so as to change our financial reality down the road.
We spend most of our money on stuff, things that are here today, gone tomorrow. Buying stuff makes us feel good, lifts our spirit, makes us feel we are in step with current trends. The latest phones, gizmos, fashion, latest cars etc. We hardly stop to consider the impact of our spending 5 to 10 years down the road. We get so caught up with the present that we leave tomorrow to take care of itself, and it usually does. We end up perpetually broke and overweight etc. If you have been working for more than 10 years and still depend on pay day to live normally, it means you have been spending money on wrong things, stuff rather than assets.
The best way to escape this trap is to adopt strategic thinking – think long term, think ahead. See beyond your nose, lift up your eyes and look further down the road. Develop short term and long term financial goals. Have a plan and save to invest in assets. Assets generate cash flow. That means the more assets you accumulate, the stronger your cash flow. This means you have multiple sources of income. You don’t depend solely on one source.
The more you spend on stuff, the less you have available to spend on assets. You have to change your sequence of spending, save and spend what is left, rather than spend and save what is left. This means you have to pay yourself first, take your monthly savings first before paying your bills and other expenditure. It is from your savings you invest in assets to generate cash flow. If you are totally clueless what to invest in, you can put your money in money market instruments like fixed deposits, treasury bills, bonds etc where you get fixed but predictable returns. At the same time, you need to invest in your personal growth, development and financial education. This puts you in position to know what to invest in, and the ability to work your plan when you are ready to start.
Taking a long term view allows you to make better choices, weighing the consequences and its impact on your expected outcomes. If you have a one year and 5 year financial goals and plan, it is easy to see whether you are on track or veering off. We get bombarded with demands and pressures to accumulate more stuff from all directions, aso ebi, new shoes, jewellery, new fashion, latest phone, laptop, iPad, TV, game console, gizmos etc. It does not matter if we own a similar item already or if we can do without it for a season until we can truly afford it without jeopardizing our financial goals.
When we don’t think through our choices, we leave the outcome to chance. It takes discipline and courage to say NO, delay gratification and follow our plan. There are financial consequences for every spend decision we make. We are creating our financial future whether are are aware or not. We are making a choice either to be poor, middle class or rich.
– Usiere Uko is editor of www.financialfreedominspiration.com and author of Practical Steps to Financial Freedom and Independence – www.amazon.com/Practical-Steps-Financial-Freedom-Independence/dp/147006832X .
