Before you consider making more money, you have to first of all be a good steward of your current income. Apart from having an efficient system of personal financial management that leaves you richer each month rather than poorer, you also need to become your banker of first resort. By maintaining a healthy cash reserve through prudent saving, you can fund your dreams rather than go from bank to bank, telling the story of your life and getting turned down in the process.
Before you start to invest, invest in your personal financial education. Invest in knowing what you are doing before you do it. If you know what you are doing, you become empowered to take the right decisions. If you do not know what you are doing, you may think that what you need is more money. If you cannot control your current expenses, you will remain perpetually in trouble no matter how much your income increases. Your expenditure will increase to catch up and overtake your income. It is like trying to fill up a bucket with gaping holes. If the rate of water outflow is greater than inflow, the level of water in the bucket will keep going down despite the inflow.
The same principle plays out in your personal finance. If your cash outflow exceeds your cash inflow, your savings (if you have any), keeps going down until you run on empty. Basic common sense dictates that you spend less than you earn. The only acceptable reason to break this law is when you are investing in assets; assets that will increase your cash inflow, and eventually pay for itself.
The best source of capital for your business start up is your savings. This is within your control. Approaching friends and family for a loan is not tidy, and in some cases jeopardises relationships. Friendship and borrowing don’t mix. It is a recipe for heartbreak and recriminations. Most people nowadays do not borrow amounts higher than what they can give away or afford to lose. You gather enough courage to go tell an acquaintance the story of your dreams, and ask for a N200K loan for example. After you are done, he offers to chip in N10K as a gift. He is saying that he does not want the hassle of being owed, with the likelihood of not seeing his money again. He has had his fingers burnt so many times, he has become credit shy. To show his support by the way, here is N10K. Besides, he has his own business plan too. He did not come to Lagos to admire the flyovers.
The best place to borrow from is your savings, followed by the banks. We are all familiar with the story of borrowing from banks, even before the global credit squeeze. They withhold credit when you need it most, and beg you to have some, when you don’t need it anymore. They are just being cautious. Bad loans is a nightmare to banks, so when your track record is not known, yes comes very slowly.
To be able to save, you have to control your expenses. You have to stay on top of your personal finances. You need to have a plan for your personal finance, and work towards it. You have to cut your coat according to your cloth, not according to your size. You can downsize to fit your cloth. You have to learn how to do long term planning, rather spend on impulse fuelled by peer pressure. You can also time your purchases to coincide with when the item goes on sale or are cheaper. For example, air fares are much cheaper when you purchase online months ahead, rather than some days before. You have to spend on good books that will put you through the paces. There are excellent resources on the internet too.
If you cannot control thousands and decide to shoot for millions, in the unlikely event that you make it, without the capacity to manage it, you will soon be back to square one. Get the foundation right before you start building. Invest in your personal financial education.
– 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 .
Following the news nowadays can get quite depressing. It seems what qualifies as news worthy is news of the disaster variety. They come in different shapes and forms – job losses, corruption in high and low places, economic downturn, terrorist attacks, you name it. As the business climate seems to get more hostile, we tend to become more risk averse and retreat into our cocoons of security. We retreat when we ought to strike out, cut costs when we ought to invest more (we become accountants rather than entrepreneurs). We tend to retreat to the sidelines and watch how things will play out. That is a loser’s mentality. If you wait for everything to be okay, for all the traffic lights to go green, you often leave it too late. The future belongs to the daring.
I remember a hilarious story told by Bishop TD Jakes during the peak of the global financial meltdown some years back. The fear was palpable. Companies were folding up in droves, many were laying off staff the way a sailor would bail out water from his sinking boat. Homes were foreclosing, banks were in distress and it was like the great depression all over again. He had taken a ride to downtown Dallas when he came across a massive construction site with a giant sky scrapper reaching out to the sky. He pulled over and watched the scene for a while. He shook his head.
Are these guys crazy?
Which planet are they from?
Haven’t they heard?
Don’t they know?
…THAT THERE IS A RECESSION GOING ON?
Why is the property owner building when he could stick his money in a hole and wait out the recession?
Where did he get the money from by the way, in the middle of a credit squeeze?
The fact is that money is called currency become it moves, changes hands. It does not disappear. When money leaves your hands, it is entering another’s. When one market crashes, another booms. Money does not leave the planet in times of financial turbulence and melt down. It simply changes hands. The belief that there is no money is a fallacy. It simply means it is scarce in your neck of the woods. You are missing out on the action. The fact that you travel economy class does not mean that nobody is travelling first class. The fact that your watch has stopped does not mean that time has come to a standstill. For many, it was the worst of times. For some, it was the best of times. While some companies went down, some had their best years ever. Different strokes for different folks.
So what do you do in times of financial uncertainty? Get fixated by the news headlines or keep your eyes on your goal? One fascinating fact about the dove is that it has incredible focus. You can speak with a microphone in your hand, and the dove will look at the mike without seeing your face.
Good times and bad times are part of the cycle of life. Sure we do some dumb things to bring them on, but the rhythm goes on. Good times and bad times, boom and bust, ups and downs, joy and sadness… There is a time for everything under the sun. Experienced investors know that markets go up and they go down. They don’t expect it to go up forever or stay depressed ad infinitum. Their entry strategy is to go in when the market hits the bottom and their exit entry strategy is to go out when the market goes up. They ride in with the bears and charge out with the bulls (buy at discount and take profits). The rookie investor does the exact opposite. They enter when the market goes up, and run for the door when the market hits the bottom. They charge in with the bulls and crawl out with the bears (buy at premium and sell at a loss). Their entry is driven by greed while their exit is driven by fear.
If you watch the weather, you will not sow your seed. If you observe the wind, you will hold back. You need a single minded focus on your goals, no matter what is going on around you. You have to choose what you want, and look for opportunities to go for it. You have to decide which end of the cash flow divide you want to play – those who win or those who lose, those who acquire assets or those who cling to liabilities. If you decide to go with the crowd, you will get what the crowd has. You get to choose where your focus will be, as tough times and good times come and go.
– 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 .
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 .
Marriage is like a man and woman going into a room and taking off their clothes with the light on. You get to see each other’s blemishes that have been hidden by clothes earlier. One of the greatest discoveries would be your partner’s attitude towards money. For some, the discovery is not immediate. And in a situation where one of the partners has lived beyond his or her means prior to marriage, it seems like the first thing they notice, once the doors are closed after the ceremony.
Money is a major part of human life. And money represents different things at different times, to different people.
Money represents time; money is a reward we get after spending hours of our life at working hard. Money is a problem solver. Money is a seed that can be sown to multiply it. Money is a gift to be shared with others that do not have.
Money gives a form of confidence.
Everyone should have some money under his or her control. By this I mean money that can be spent without having to answer to anyone on how and why.
Money can build walls between people in any form of relationship and this is even worse in marriage.
Most couples no matter how spiritual, educated or in love will disagree over money at one point in time or the other and where this is not well managed, light cracks begin to appear in the marriage.
I once read that when sex is good in a marriage, it is 10% and when it is bad it is 90%. I want to relate the same to money, when finance is good in a marriage; it is 10% and when it is bad it is 90%.
In the light of the times we are in today, I want to focus on when the finance situation is bad.
Everyone has a financial situation or the other, sometimes it seems as though marriage places a magnifying lens on our financial situation. Immediately after marriage your status quo changes, especially here in Africa, now you’re expected to participate more in family events and your own cost of living is growing too.
Whenever things are tight like this in families, there’s lot of pressure on husband and wife, or the intending couple planning to get married.
The stock markets have not boomed like everyone expected, plans have been made based on expectations that have not been met. Instead we have a situation where banks are trying to recovered monies borrowed out. And now a festive season is about the corner, what do we do? Where do we run to?
The last thing we are expected to do as believers is to take the pressure on one another and ruin the spirit of the season.
Love should help us bind more to each other, love can conquer all, fit your budget into what you have and enjoy a lower budget holiday bearing in mind that the next will be greater!
Though the cherry trees don’t blossom and the strawberries don’t ripen; though the apples are worm-eaten and the wheat fields stunted; though the sheep pens are sheepless and the cattle barns empty,
I’m singing joyful praise to GOD. I’m turning cartwheels of joy to my Savior God.
Counting on GOD’s Rule to prevail, I take heart and gain strength. I run like a deer. I feel like I’m king of the mountain! Hab 3:17-19 (MSG)
Although the fig tree shall not blossom, neither shall fruit be in the vines; the labor of the olive shall fail, and the fields shall yield no meat; the flock shall be cut off from the fold, and there shall be no herd in the stalls
Yet I will rejoice in the LORD, I will joy in the God of my salvation.
The LORD God is my strength, and he will make my feet like hinds’ feet, and he will make me to walk upon mine high places. Hab 3:17-19 (KJV)
So put up the Christmas lights and start playing the Christmas jingles, put everyone around you in the holiday mood.
Bring down every imagination and high thing that exalts itself above the knowledge of God and enjoy this Christmas.
All things are working together for your good!
Lots of Love
omolola ezeifeoma
Life is full of choices. We make them every second. Conscious choices and unconscious ones. Good or bad, those choices affect and reflect our lives. Every choice we make is multidimensional. That means it affects us in more than one way. The choice we make affects us and those we did not make also affects us positively or negatively. However, considering the choice we are not making is very important in establishing a right decision.
There is always an “alternative forgone” whenever a decision is made. It is called “opportunity cost”. Opportunity cost is important in making financial decisions. Onegood way of making sound financial decisions and creating long term wealth is to always consider the alternative we forgo when we spend money or borrow money. The virtuous woman of Proverbs 31 is said to “…consider a field and buys it”. She weighs her options, various alternatives before she makes a decision. I like that.
Let’s take two scenarios to illustrate. First, when we spend money and Secondly, when we loan money. If you decide to spend just one minute less on phone calls every day and we assume the monetary value of that one minute is 1(currency). You forgo one minute and you gain 1(yen, dollar, naira etc). If you do that daily and invest it for 30years at an average of 10%, you will be worth over 1.5million. Wow! For each “just a minute please” you spend on the phone you forgo 1.5million in thirty years. Imagine if you decide to reduce your call expenses by 1/4 –you might be worth 10million in 10years. So considering the opportunity cost of making a call might make all the difference in your life.
Also if you decide to loan money to buy a car today, you get comfort, mobility, prestige and so on. But what do you forgo: You forgo the compounded interest on the principal, the compounded interest on the interest you pay the bank and also the compounded interest on the interest both principal and interest would have earned. So while you lose all these at the end of the loan period you have nothing but a seriously depreciated vehicle. Two zero in my opinion. Considering the opportunity cost, the alternative you forgo sure makes a difference.
Please don’t lose the message; it is not meant to stop you from making relevant calls or buying new cars. It’s just a reminder that before we make any financial decision, we should ask ourselves “WHAT IS THE OPPORTUNITY COST”.
– emmanuel aladenusi