Out of Control Financially

I don’t pretend to be a financial expert or anything like that, but if my experience can help you in any way, then my job is done. I think I have had a difficult time managing my finances in recent months and even years, and here are some of the lessons I have learned. Not only that, but I will welcome any advice you can give me. I’m constantly reading books on how to better my financial situation in one way or the other. This is from the perspective of an African.

Ignorance is the worst enemy

If you don’t even know you have a problem, there is very little chance you will ever fix it, so one important thing for me was to admit I had a problem before I could ever even begin to start seeking a solution. For a very long time, because I was earning revenue from the different activities, I didn’t find the need to track my finances, when I wanted something I just had to wait till I had some income then I’ll buy it, when I had a problem, I just waited for some money to come in then I’d solve the problem. My financial difficulties only started showing when the responsibilities started increasing dramatically. I want to believe your presence here reading this article is an acknowledgement that you do have a financial problem that you are trying to fix.

The solution to your problem is simply financial education which comes through a lot of reading and practice but also through countless mistakes which you will learn from. I know they often say “we learn through mistakes” but I want to update that to say “we learn through controlled mistakes”, you can’t expect to learn anything new from making the same mistakes every time and that’s what the problem is, we make the same mistakes but just differently, that’s why we never learn from them.

Leaking money

Money is not the Problem

People often tend to imagine money as being the end to all of their problems, like having more money would solve all the problems they have in their lives but let me just give you a list of problems money can’t solve no matter how much you have; mental health, love, cancer, depression, foolishness etc. Yeah, money will solve all the other problems you have, but in our quest to obtain this money we often end up getting one of these instead, and it leaves us worse than where we were before. It’s important to understand that money is not the problem, yes, you might be in financial difficulties, but that’s just the symptom of something even bigger.

If a bucket has a leakage, the problem isn’t the water not remaining in the bucket but rather the hole in that bucket letting all the water through, and in a lot of ways, money is like that water, our biggest problem is that we keep letting the water (money) through, and we end up in a shortage. It doesn’t matter how much more money you have if the leakage is still there, you will eventually still run out at some point.

Responsibilities Weigh you down

Responsibilities are one of the major things which put us in financial turmoil. There are first the responsibilities we inherit which are independent of our will, maybe relatives we have to take care of or even still problems we were dragged into, there isn’t much I can advise you on that, but I’ll say depending on your situation, you should learn how to deal with it.

The second is the responsibilities we take up on ourselves voluntarily or involuntarily. There is a great quote which says

The things you own end up owning you

which is very accurate. Right now you may be looking at that fancy car and that big TV as your priced possession you are delighted with but depending on how you manage your finances, those things might end up owning you, and you find yourself having to pay them a salary in the form of maintenance. Its important that you consider when buying anything right now how it will be managed in the future, 5–10 years from now, so they don’t end up having to take away even the little income you have then.

Notice that the more things you own, the more responsibilities you have, and all those dig into your finances directly or indirectly. The most striking examples of these are children, businesses, tuition, real estate etc. Before you take on a responsibility like these, make sure you can sustain it 10 years from now.

Needs VS Desires

In the state of denial I was in, I didn’t make a difference between my needs and my wants, I just assumed that whatever I desired was a need for me. I wanted the new iPhone, it was a necessity for me, I wanted the new dress it became a necessity to me etc. When you think about it, our needs really just come down to the things we need for survival, the things we literally can’t do without. At the top of that list is Food, followed by health, then shelter in that very specific order and to be honest, the rest is just facultative, we just tend to convince ourselves otherwise. It’s important for you to acknowledge what your needs are and what your desires are, not having the latest iPhone won’t kill you, but spending a week without eating definitely will, focus on your needs and plan for your desires.

You just can’t afford it

It’s a hard truth for many people to accept, and most persons really go out of their way to deny this reality, but it is simply undeniable, you just can’t afford it. That new car, house, food, dress and so much more, you just harm yourself trying to prove something you are not. The reality of it all is that depending on how much you make, you should be eating a certain grade of food, dressing a certain way and if you keep denying this reality, there will come a point when life will push you into a worse position than you were already. You have to understand that even to have kids or to be in a relationship, you should have at least a certain level of income. A relationship might seem a necessity which doesn’t necessarily come with a cost, but unless you are just looking into the eyes of each other, I think there is the need for some financial resources. The thing is, most people consider that to be a necessity. Even to have a child is something which comes with a huge expense more than any parent can accurately plan for, without mentioning how life changing that decision is. So even though it is given to everyone to have children freely, ask yourself the question, can you afford it?

The Simple yet complicated solution

The solution to all our financial problems is summarized inside a single sentence and even though this statement is so easy to understand, virtually 99% of the population can’t abide by it. You really have to go out of your way to be able to do so.

Don’t spend more than you earn

Notice that the statement didn’t say, “don’t spend more than you have”, it clearly said what it did and earn here refers to a regular source of income. So if you make 10k in a week, don’t spend more than that in a week, if you earn 300k in a month, don’t spend more than that in that period of time. Financial education is way more complicated than just this statement, trust me, but this is the starting point. So ask yourself this question now, do you spend more than you earn? If you don’t earn anything then you are even in the worst position possible.

Another thing I noticed was that I didn’t track my expenses, I just assumed I could remember all what my expenses were, but you will be surprised to see how much of your income snacks take. It’s important for you to keep track of all your expenses even the smallest, you can use a notebook or any other means you find convenient, personally I use the app BudgetBakers, I like its simplicity and ease of use. For the past year this has been my daily companion and I can’t spend a day without writing down all my expenses in there.

Here is a sample of my balance over a period of one month. Before the end of the month, I was already out of money. Here you can notice how the curve slowly dips down to zero, the only expenses I would have noticed about this month are the 2 major dips which happened early on but thanks to this app, I was able to see all those expenses and make the difference between needs & desires.

You may think you don’t need to track your expenses because you are already making a lot of money or maybe because you don’t earn anything substantial but trust me you want to find those leakages and plug them up before they become huge holes.

Optimize your revenue for your needs and reduce your desires because desires are endless, today you may want that new dress but trust me, tomorrow you will still want an even newer dress on the market, except that your income wouldn’t have increased in the meantime.

In conclusion, I’ll say that nothing can replace the knowledge you’ll get from reading books, this article isn’t even a summary. I’ll advise you to start by spending less than you earn because we never know what the future holds for us.

Thanks for reading!!

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