Personal Finance

How to survive in between financial jaws.

As the first days after college and first months into a job come and go, a girlfriend is converted into a wife; kids arrive and school fee is no longer dads but you are the dad, responsibilities grow at a rate faster that your income and you feel squeezed in the middle, center and side, it is time to reflect.

It is always exhilarating to step into a supermarket, a basket in tow, supportive attendants directing you to the appropriate rows to collect your favorite shampoo, or bread. It is even better when someone else is paying for the shopping.

Accountants talk about a sustainability measure that informs a business continuity called jaws. Think about it as a measure of an entities’ ability to generate revenues vis-a-vis generate expenses.

Life is like a crocodile’s mouth, and you are inside that mouth. The upper jaws are the income and the lower jaws are the expenses. Each time either or both jaws move, they put you in some level of danger. It is best if the upper jaws (income) moved outwards as opposed to the lower jaws (cost) moving inwards. To remain in a neutral position, both should move equally in the same direction.

Knowing your income composition is non-negotiable. Knowing its volatility is most important to keep you grounded because you know what to protect most.  If you depend on a sponsor one hundred percent, you would know that keeping the “guka” alive is your paramount responsibility. It therefore goes without saying that having more than one source of income is doing yourself a big favor. Passive incomes require very little of your daily effort and go further in making you financially independent and therefore should be prioritized.

The only way for humans to express their financial might is in their expenditure. The more copious and conspicuous our consumption, the more our perceived financial capability. That is why potbellied men make hustler chicks go coocoo and there-in lies the trap. Our desire to show our ability through our expenses leads to personal deceit, over expenditure which in turn leads to overborrowing and then a cycle of endless financial struggles.

To manage expenses, it is critical to differentiate what you need from what you want. Your needs make you live, while your wants make you show others how you are living. The way you finance either of these two is very important. For your needs, any tactic, including borrowing and begging should suffice, while for wants, saving and investing is the best way to go. If you are borrowing to finance your first fast bold red car, read Subaru or clubbing, just remember you are hurting your future financial independence.

Some needs like housing and food can be wants if we go overboard. Living in a penthouse without money to purchase food or borrowing to eat pizza simply means you have either over stretched your needs or you have not understood the concept behind needs and wants. Using most of your money to buy booze and entertain your friends is downright indiscipline.

Keep records of what you spend your money on and categorize those items as either necessary for survival or those that go on to enhance standards of living. A high standard should be financed by savings or investments and if not, then should be trimmed from our budgets and our lifestyles rejigged to fit into our income brackets.

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