I used to think being broke before the next payday was a hoax. I used to believe people who said that were just faking it or being stingy.
I never knew these things happened until it happened to me. Six months ago, I got employed at a company as their Sales Manager. My salary is N150,000 monthly.
With that amount, you would think I had arrived. I thought so too. However, before my first salary came in, I had already incurred some debts that I had to pay on my next payday.
Apart from this, I realized that my rent and feeding each month were eating up half of my salary. Transportation and other utility bills were there too.
After calculating all these expenses, I realized that by the second week, I was broke again. Then you would see me borrowing money from friends and family again.
This cycle continued until recently, when I finally told myself that enough was enough. I started tracking my expenses and doing proper research, and I discovered 6 problems that always kept me broke before the next salary.
Let's dive in.
1. I treated my salary as Christmas, not payday
Anytime my salary entered my account, you would see me jubilating. I just found myself spending without budgeting. It was during that exciting moment that you would see me calling my girlfriend and promising her the whole world.
We would go out together to Chicken Republic in the Opebi area of Lagos State. There is nothing wrong with taking my girlfriend out, but what was wrong was that I did all these without an actual budget.
Apart from that, you would see me getting new clothes. I love fashion a lot, and you would see me buying new clothes that were trending. Often, I got about two to three clothes in a month.
According to EFInA's Access to Financial Services Survey, it was discovered that 62percent of Nigerians do not have a monthly budget for their salary. Truthfully, I was also guilty of this, and I can categorically say that I was one of them.
It was only when I discovered this problem in my finances that I kept living the same way with no changes.
However, since I discovered that this was a problem, this is what I did. I followed the 50/30/20 rule, and it has been helping me a lot.
50 percent of my salary, which is N75,000 goes into my Needs such as Food, Shelter, and Clothing. I also included paying off my previous debts under the 50 percent. Sincerely, I often struggle to fit all these into this percentage because, truthfully, it is never enough.
20 percent of my salary, which is N30,000, is used on a monthly basis for my Wants. Under this category, if I want to have a nice time, data, or just want to eat out, every one of my wants expenses falls under this percentage.
30 percent of my salary is saved for future goals or investment.
This is what I learned. It wasn't easy when I started implementing this. But after a month, it became quite easy, and my subconscious mind adjusted to it. Hence, no more impulse spending.
2. I kept all my salary in one account
When I started this new job six months ago, one of the mistakes I made was that when my salary entered, I put all the money into one account. As a result of this, I always thought I had money.
It always reactivated the impulse spending in me. I always told myself back then that if I spent a certain amount, nothing would happen to me. I would still be alright because I had more than enough.
It was only when I stopped putting all my money in one account that I started finding a solution to being broke before month end.
What I did was this: immediately my salary enters my account, I use the 50/30/20 rule. I put 50 percent of my salary, which is N75,000, into my OPay. This is meant for my needs, and we all know how easy it is to transfer money on OPay.
Also, I transferred 20 percent, which is N30,000, to my Keystone account. This is meant for when I want to enjoy myself.
While I saved the remaining 30 percent in my GTBank. This has helped me to set boundaries with my finances.
3. I used debt to fund my lifestyle
I always thought I was smart because I was funding my lifestyle with debts. This ought not to be so. I didn't know the difference between Wants and Needs back then.
If I wanted something done and I didn't have the resources, I would always borrow. But since I learned to manage myself with the little I earn, I have stopped borrowing, and I am now happier.
4. I ignored the small leaks because they felt small
Back then, my subconscious mind would always tell me that what I was buying, I didn't need it. But I would always tell myself, "I am a money man," and then laugh it off.
I never knew that data for social media, the little here-and-there giveaways, the little "elder brother" giving to the younger ones in my area, shawarma, and many more small expenses were actually making me broke.
Yes, they might seem so little, but if they are not well managed, they can lead one to a financial crisis.
This is the little breakdown of the small leaks for me:
- Food Delivery and Eating Out: N15,000
- Shawarma: N4,000
- Data: N6,000
- Random transfers: N8,000
Total: N33,000. This is more than 20 percent of my salary. Can you see how dangerous these small leaks are? I see it now.
What I did differently after getting my facts right was that I ensured all these small leaks were included under my Wants. I ensured I didn't spend above the percentage allocated to them in my salary, which is 20 percent.
Ever since then, I have been having peace of mind and I am happy at the same time.
5. I had zero emergency fund
I believe many workers are guilty of this. Many workers don't have emergency funds or savings somewhere. I was guilty of this too, but not anymore.
I have a colleague at my workplace whose name is Ola-Daniel. We often discuss finances and other areas of life. Though we share the same ideology about finances,
anytime I told him that we should always save a portion of our salary for emergencies or unforeseen circumstances,
he would always flare up and say, "May I never have a reason to save money for an emergency." In fact, he would always ask me if I was a genuine Christian. I would reply that yes, I am.
He would then say, "If you were a genuine Christian, why are you not positive about life? Why don't you have faith that unforeseen circumstances will never come up?"
I would reply him as a Christian brother that "In all thy ways, get wisdom." Then we would keep arguing on and on.
One day, an unforeseen circumstance happened to him. He felt internal pain and it made him uncomfortable.
At that time, he didn't budget any money for that. He had no choice but to use the money meant for other things, which eventually destabilized his budget for that month.
Before the month ended, my friend borrowed money for the first time. He was eventually dragged into the same web I was in before light came.
He later told me that he agreed with my concept of saving for emergencies. He said truly, if he had been saving on a monthly basis for emergencies, he would have had no reason to borrow for his unforeseen circumstances.
Ever since then, he has been saving for emergencies, and now I can fully attest to the fact that it has really been helpful for him.
6. I focused only on cutting costs and forgot to grow income
What was always on my mind was how to cut costs and minimize my daily expenses. I focused all my energy and mental thoughts on strategies I could follow to minimize costs.
This was when I started trekking some distances in order to reduce the amount I would pay for transportation. I moved from my one-room self-contain apartment to a single room.
I rarely bought things to eat outside. I cooked everything I wanted. I thought that was the solution to making my salary enough.
I realized later on that even after doing all these things, my salary was never enough. I never knew that inflation was not here to joke with me. It kept on increasing and increasing.
I discovered that if I didn't do anything about growing my income, inflation would keep reducing my purchasing power and keep me stagnant most of the time. I never knew you can't out-cut inflation.
This is what I did differently: I started learning video editing on the side in order to grow my income. Within the first three months, I got 4 long-term clients, and they pay me the sum of N15,000 each monthly. In total, that is N60,000 in extra income. This extra income didn't go to lifestyle. It went into future savings.
Conclusion
I always thought being broke was part of me. What I failed to realize on time was that my being broke was due to bad money habits.
I discovered these six problems were the major reason why I was always broke before the next payday. I never thought that I would be able to come out of my cycle of brokenness, but I did.
Another amazing fact I learned was that money didn't change because I had more income. Money changed because I had a new mindset, and that is everything.
I have learned that no matter how much you earn, it can never be enough for you because humans are insatiable.
Everything changed when I changed my mindset about money, and everything changed after I started protecting future me.
You can also adopt the methods I used, and sincerely, you will surely see positive changes. You can try it out and give me feedback in the comments box below.
Till I hear from you next time! Bye for now.
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