Q & A with The Money Doctor

Q: What is the best way to cut spending? I have a healthy spending habit that makes me spend whenever I have some money.

A: The best way to cut your spending is to invest whatever you have into one opportunity or another to generate additional income for you. The ideal system is to "pay yourself first," that is, whenever any money comes into your hand take out what is meant to be invested, quickly invest it and live off the rest.

Stop spending on your expenses or wants first whenever any money comes your way. This will continually lead you to lack as any spent on your needs and wants is gone forever. That portion that you take out for investment purposes will continue to provide an income for you.

I would advise you start taking out 10% of whatever comes in for investment purposes and increase this amount steadily as your earnings increase. This will automatically reduce your spending.

Taming the Next House Rent Monster

Most adults of workable and retired ages dread one day more than any other in a calendar year.  Just the mere thought that this day is around the corner or at hand tends to make them break out in sweat or tremble with fear and uncertainty. Days come and go quickly but the day you have to pay your next house rent is a day many wish would never come.

Now house rent costs rank as the biggest expend in everyone’s cost outlay in a particular year; you would think that people would have this money on due date, but alas, they usually run helter-skelter during this period trying to raise the money.  This shouldn’t be so. We should stop having jitters due to the huge cost, rather we must make plans to pay up.

In my experience people usually leave it till very late before they consider the next payment. When it is 3 months to the next payment they try to piece it together, almost believing for a “miracle” to pay their landlord. Miracles do occur but not for things you should have properly planned to take care of such as your obligation.

The first thing you need to do to tame the next house rent monster is to embrace the “pay yourself first syndrome.” Whenever you earn money don’t rush immediately to spend it on your expenses. Instead focus on taking some from it towards investments and anything you want to save for which includes house rent. 

Well you might be saying the money’s not enough for all your expenses, yes but no amount is ever enough. Expenses always rise to meet income. Notwithstanding when you pay yourself first you have something for your future which is one of the key secrets of the rich and wealthy.

It also helps for you to work with a budget so you can track where your money is going to. This budget instead of making projections for inflows and outflows must have a series of rows under inflows for paying yourself first. Make sure to put the house rent account here. With a monthly budget you can make spending cuts on whatever is unnecessary or excessive thereby freeing up money for more important things. A budget essentially shows you where your money is going.

Next, divide your rent into equal monthly instalments till the next rent is due and commit to putting these instalments in an account that you cannot readily access. Go to the bank and give them a standing order if need be so that this money is transferred to another account without you having to do do by yourself.

You can also work with your partner or friend to encourage and follow up with you to ensure you do keep this money aside. Once done faithfully between 3-6 months it becomes easier to live within the means of the remaining balance left because you must have a roof over your head.

Commit to ensuring that your landlord gets the funds completely in one instalment and before the due date. The problem with most people is they pay the current rent, inadequately plan for the next payment within 12 months, then they start running around 3 months to the time looking for where to borrow from. 

Efficient money management thrives where you take it step by step in the achievement of your financial goals. It rarely occurs for a huge lump sum to just come into your hands that will solve all your problems at once. Those who cannot manage N1000 surely cannot manage N100,000 not to talk of N1,000,000.

There’s really nothing you cannot accomplish financially when you break it into smaller steps and take it one at a time.

5 MYTHS OF MONEY

Wealth creation and generation is hardly rocket science. Rather it responds to the application of several laws and principles that will work for almost anyone, anywhere. The question now is – Why are so many people living in want, lack or penury?  The reason is because money education is not taught in any schools, so we have grown up believing several wrong ideas or myths about money that hold us back. Let’s examine them in turn:

The first myth of money is that you need to undertake profound spiritual exercise to acquire plenty of it. This myth gains ground in a hugely religious society such as ours. People organize prayer meetings, night vigils, pilgrimages, miracle crusades and the like in the quest for wealth. But have you heard the really wealthy attribute their wealth to this strategy?  The really wealthy are not particularly close to God in our society while many of those who are close to God are very poor. Money thus does not answer to prayer or spiritual exercise.

Another myth that throws people off on the road to achieving wealth is the famous line – saving for the rainy day. While this statement encourages one to save, however it is for the wrong reason. Rainy days signify emergency situations, which tend to wipe out all your savings. It is what you save that can be multiplied and increased in order to grow wealth. So instead of saving for the rainy day also save for the opportunity day as wealth can only be created when you take advantage of opportunities.

The third misrepresentation is that money is meant to be spent. According to most people life is too short so let’s keep spending. This mindset usually is that of those in lack/want. Money is not meant to be spent, rather it is meant to be multiplied. The difference between the rich and the poor is that while the rich multiply their money several times before they spend the proceeds, the poor spend their money once and they can never get any value from it again. If you keep multiplying your money over you will become wealthy eventually.

Putting your hard-earned money into giving loans to help others is another myth of money. When someone approaches you for assistance and you loan them some money you are giving up the opportunities to multiply that money. This is because many people hate repaying their loans and default. Infact defaulting loans is one of the biggest reasons for the parting of ways among friends. Please leave the loan business to the banks who are set up to do it. Instead give money gifts to people who ask you for loans which you can afford and they are under no obligation to return. Your finances and relationships will be better for it.

Finally it is pure myth to believe that you can manage large sums of money when you cannot manage little sums. A man who spends hundreds anyhow will do so when he has millions. Wealth building starts one Naira at a time. Learn to manage One Naira and you can manage One Billion Naira someday without frittering it away.

Wealth creation starts from the inside out. Money is a reward for solving problems. Once we can get beyond the myths we can finally  put  money into best use working for you and in no time you will stop working for money!