Are you under financial pressure?

Author of   ‘Practical Steps to Financial Freedom and Independence’, USIERE UKO, continues on how people create financial pressure on themselves

In part I of this article, the point was made that most financial pressures we experience are self inflicted. It could be directly by spending money on what we ought not to spend money on in the first instance, or spending too much to please others (temporarily). It could also be indirectly by not preparing for the unexpected through having an emergency fund and insurance.

We use our friends and family as our emergency fund and insurance and therefore expose ourselves unnecessarily to financial pressures by living on a financial brink without a

buffer. It is like driving across the country without a spare tyre. When we eventually get a flat, we stand beside the road to ask passersby for help (after blaming unseen forces for our negligence). Since we seem to have gotten away with it a couple of times, it eventually becomes our normal mode of operation.

The illusion of more money

People who operate in this mode sincerely believe they are doing nothing wrong. Getting them to become aware of the fact that there are better ways to spend their money can be an uphill task. They resist such a suggestion. As far as they are concerned, more money is the solution to their problems. What they need is another pay raise, promotion or a better paying job. What is really interesting is that folks that get pay raises at least once a year also think that more money will solve their money problems. This mindset blinds them to the fact that they get more money every year.

People with this mindset are used to operating permanently on broke mode. They are broke no matter how much their income goes up. Their brain has become wired through the force of habit to spend everything that comes in.

More money simply comes to amplify what is already inside of you. If you are a saver, you save more. If you are an investor, you invest more. If you are a spender (consumer), you spend more. More money does not make a saver out of a consumer. It is an inside job.

If you are mismanaging your current income presently which is often the case, more income will simply translate to more mismanagement. You may manage to save but not for long. Your entrenched money habits will wipe out that savings in no time. There will always be more expensive things to buy and more people to please.

Advice without cash backing

We are always faced with people who advice us what to do but do not bring the money to do it. This is very common among family and friends. They bring ideas but no money. They tell you to do it this way or that way to add more class or glamour but conveniently forget the financial aspect. In my family, we have this ground rule that anyone who brings an idea that costs money should put down the money or keep the idea to himself.

You are planning a wedding and you know what you want to spend, then others will come with advice on how it is done, what should be done etc and then walk away. So they set goals for you while you get saddled with the bills if you are dumb enough to swallow it hook, line and sinker. There is no law regarding the wedding gown, event venue, food served etc. It is your wedding. Make it yours no matter what others think. If they think strongly enough, they should put their money where their mouth is.

The same scenarios play out in funerals. Ideas and suggestions flow freely, buy one get one free. The people without money speak loudest and bring the most expensive ideas.

This is how it is done,

That is the tradition,

When I went to my friend’s father’s funeral, this is what they did.

It is unthinkable not to do this

It will bring shame to the family

After the flow of lofty ideas, when it is time to drop the money to execute those brilliant ideas, silence descends on the camp. The loudest without money expect the prudent to fall into the trap of pleasing people and ending up with a hole in their finances.

Most of the expenses we incur are unnecessary. We like to go overboard on celebrations. Naming ceremony, housewarming (I wonder what needs to be warmed and by whom), birthday parties, weddings, funerals, you name it. We print souvenirs etc to share in addition to entertaining uninvited guests. This is all well and good if your finances are in good shape and you can truly afford it (meaning you are spending your profit, not your capital). But when you put up this show while your finances has ‘k-leg’, then there is a problem. You find same celebrants shortly thereafter looking for money to borrow for their children’s school fees. It is not by force.

Will it matter five to 10 years from now?

The interesting thing is that months or years later, nobody remembers how fantastic the wedding, housewarming, funeral or birthday was. You may even fall out with the people you tried to impress. People do not remain impressed for long. Some marriages hit the rocks shortly after the spectacular show. The wedding was a roaring success but the marriage failed where it mattered most. Looking back five, 10 years later, it was all vanity.

One of the key challenges we face in making financial decisions is spending on things that matter. Most of our spending is driven by the desire to look good to please people, no matter how temporary. One question I often ask myself before making a spend decision is ‘Will this matter five to 10 years from now?’

This question has stood me in good stead when faced with other situations and circumstances – a decision, slander, loss, major upset or something as minor as being cut off in traffic. When I ask myself it if will matter in five to 10 years time, it becomes ridiculous and sometimes I burst into laughter to the surprise of the offender. Wasting our time, energy and resources on things that don’t matter does not make much sense in the long run.

We spend too much money on things that don’t matter to the detriment of things that matter. If you can truly afford it, it is not really an issue. If that expenditure is going to put you under financial pressure, then you may have to pause and give it a second thought. Public opinion is very fickle. Those that hail ‘there is no one like you’ today will be the same that will yell ‘crucify him!’ shortly thereafter. Before you wipe out your savings to please the people, ask yourself if pleasing them will matter five to 10 years from now.