Someone once said… ‘Being broke is like Being in debt and trying to pay back with a smile and a wink’…Sure your creditor won’t like that, lol.
When it comes to reasons why people get broke, the number one reason that would come to the minds of many would be ‘I don’t make or earn enough’. True, that this most times is one of the reasons but if carefully looked into, there’s more to it than just not earning enough.
All right, for a minute let’s look at it, how much is your enough? Your enough might be someone else’s broke and on the other hand your broke might be someone else is enough, so not having enough is relative and all about perspective. And our perspective about money is influenced in two ways; how we relate with money and our understanding of how money works.
So, to get this in details below are 7 reasons why you could go broke again this year and how to prevent it.
1. You don’t have a Budget
There are misbeliefs and misconceptions people have about budgeting; for example they say ‘budgeting is for people who do not have enough money’. But actually it is for everyone who wants to make sure their money is enough. You must gain control over your money or the lack of it will for ever control you. And when money realises that it is in good hands it wants to stay and multiply.
2. Buy Quality not Cheap.
It is understandable that buying cheap over quality can save you a little extra, but for the long-term you would want to consider quality first, because they are long lasting and reliable. Specially, clothing, gadgets even education whatever it is you plan to spend on, and of course you don’t need to break the bank but consider buying quality rather than spending on the same product you brought earlier because you bought cheap.
3. Your Lifestyle is Higher than you can Afford
You must have heard the saying..’ do not break your saving to impress. As simple as this is, it is one of the reasons people go broke.
You see, people are always going to have their own opinion about you; what you have, how you live, where you stay and they might be people you know or don’t know but don’t do something just because you think it will impress them; if there is need to upgrade do that at your own pace and not because you need to make a statement.
4. Only Invest in what you understand.
The fastest way people lose money is investing in what they don’t understand, just because people are making money from an investment doesn’t make it a good investment. Do not allow the fear of missing out ‘FOMO’ force you into putting your money in schemes that would eventually go south, do your own research or talk to a financial adviser before investing.
5. You don’t care about personal finance.
For a long time I thought the most important thing in finance is my ability to make more money, increase my income and get that pay rise, but just as it is important you increase your income it is equally important to know how to manage your money, savings, investing, budgeting, building credit score and understanding how money works. So you don’t spend your whole life working for money but rather how to use your money earned to build a life of freedom for your future self. Learn online and buy books on personal finance and educate yourself. You can also check Naijaweekender Personal Finance for weekly blog post on money.
6. Don’t keep your Money in the Bank Doing Nothing.
This might be a slow way to lose your money but your bank won’t tell you because for them, it’s business. Keeping your money in the bank doing nothing is slowly eaten up by inflation, your 100k in the bank after a few months or a year will loss value and won’t buy you what it could have bought you a few months back.
Inflation in Nigeria is about 21% as at January 2023. And it might get even higher within a few months. And with this inflation rate your 100k if saved in January 2022 might have lost 20k in value, although your 100k will still be reflective but the value has been eaten by inflation.
So if you have some money saved up for a long term, I will recommend you save in a High Yield Savings Account which pay 5 to 7 times more interests than a regular bank savings account. More details will be communicated on our future post.
7. Diversify your Earnings
It is not only bad to live in today’s world on one income stream but also dangerous to do so. It has become easier for us today to diversify our income prowess and scale whatever service or product you want to do to a global audience. The world is a global village and only does who can harness the power of the internet to earn more money will strive.
