Maintaining a healthy cash flow in life
Brief philosophical take on the origins of money…
For us humans, the need to survive continues to persist at the summit of all our needs. To effectively survive in our world, we require things of value such as food, clothing, and shelter. Although there are some notable exceptions that could/can do it all (such as Leonardo Da Vinci), most people – like the individual cells of the human body – are specialized. Since many of us are specialized in our area of expertise, it is so often the case that we must frequently depend on each other to survive. In this way, our human race is reminiscent of a giant human body with each human representing a single cell. Think about it for a second… your brain cells depend on your heart cells to force the beating heart to send them the rich supply of blood they need to function properly because they (your brain cells) cannot do it themselves. In much the same way that our brain cells depend on our heart cells for adequate blood supply to function, we frequently depend on the expertise and resources of the people around us to survive.
In order to gain access to the expertise of those around us, we very often must give them something they value in return. Ages ago, humans would trade goods and services for other goods and services in what was known as the “trade by barter” system. The problem with this system is that there was no standard unit of trade. I mean who is to say whether or not giving you seven loaves of freshly baked bread is fair payment for one of your goats? The other problem with this system must have been the difficulty of physically carrying around the wares that people were willing to exchange for other valuable things they desired. To circumvent all of this annoyance and inconvenience, we eventually created currency in the form of coins made from precious metals such as gold and silver and used them as a medium of exchange. As time elapsed, our currency morphed from metallic coins into many different forms… from elaborately printed paper notes, to the current digital form that magically appears in many of our online bank account interfaces on the 1st and 15th of every month.
How to deal with money in our modern era…
Regardless of what form it takes, the base principles that govern the proper care and use of money remain mostly unchanged. As we’ve moved into the digital age, more ways to earn and deal with money have emerged into our collective consciousness but the healthy flow of money in each of our lives still largely follows the same timeless principles. The weird thing is that although the principles of proper money handling haven’t changed much with the passage of time, many of us still struggle with money. Many of us either can’t seem to ever earn enough of it, or we spend it too quickly on non-critical things when we do get a hold of it. Needless to say, both of those behavioral patterns yield the same result… constantly having no money. In this essay, we’ll lay out some fundamental ideas on what it takes to properly deal with money and foster more financial prosperity in your life.
Get better at earning money
Acquire things you need, resist things you don’t
Check your bank balance often
If you earn $10 do not spend $11
Avoid frivolous debt
Pay yourself every month
Get good at saying no
Fortunately for a lot of us, we grew up in households where well meaning parents consistently emphasized the importance of hard work as the sole ingredient for achieving financial solvency. To their credit, our parents were mostly right… asides from a few exceptions, hard work is a necessary ingredient for financial success. At some point in your life though, you will learn (if you haven’t already) that there is a big difference between necessity and sufficiency. As it pertains to earning money at the current state of human consciousness and development, hard work is necessary but not sufficient. You know this is true because like me, you probably know a few folks who work crazy hard but can never seem to make enough to live comfortably. In contrast, you might also know folks who always seem to know when and just how hard to work in order to make truck loads of money. To the casual eye, this seems terribly unfair. Why is this the case?
Well the key here is to understand that the world doesn’t reward you for how hard you work… rather, the world rewards you for how much VALUE you can provide. Think about it for a second… why did you open your wallet and pay for your washing machine? Probably because it gives you the freedom to do other more productive things while your clothes get washed instead of having to physically hand wash everything yourself. That’s the same reason why most of us buy anything… because it provides some measure of value in our lives in the form of time savings, energy savings, etc. So please note that while you might have to work hard to bring things of value to the world, it isn’t the hard work that gets you paid… it’s the value you provide. Look around and ask yourself what people need, then get to work!
If we broke it down to the bare essentials, you really only need food, clothing, shelter, and human interaction to survive. Although most of us know this and will agree that it makes sense, our collective thirst for luxury drives many of us to acquire things that are above and beyond the need for survival. Do you really need the latest iPhone every time Apple releases one? Or does your current model work just fine? Do you really need to have 20 guitars in your collection or will one nice electronic and one beautiful acoustic do just fine? When was the last time you watched anything on your streaming service? Could you cancel that and save some money? Asking yourself these types of questions and answering them with brutal honesty will help you avoid paying for things you don’t need and perhaps will never really use. If you can avoid spending money on such items, you will be able to keep more of the money you already have.
There is a very good reason why cars have a fuel gauge, and that is to provide feedback to the driver so that he or she knows when they are about to run out of fuel. In the same way, you should constantly be checking your bank balance on a weekly basis to know how much money you have in the bank. Thanks to the modern wonder also known as the internet, you can very easily check your bank balance everyday from the comfort of your own home. Frequently checking your bank balance is beneficial for a number of reasons. First, keeping tabs on your bank balance will give you direction on whether or not you need to curtail your spending. If you notice that you are consistently spending more than you earn, then you can make adjustments to correct that trend before you run out of money. Second, you will make it difficult for fraudulent people to steal money from your account without you noticing it. If you check your bank balance often, you will notice when something is wrong and be able to quickly report it to the proper authorities.
A lot of people shy away from regularly looking at their bank statements perhaps for fear of what they will find. This very emotional way of avoiding reality is understandable, but not a sustainable way to live your life. Face the music and look at your account so that you know what adjustments to make. Speaking from experience, I can tell you that pretending like your money problems don’t exist won’t make them go away.
Of all the points in this essay, this is the one that you must absolutely master if you really want to remain financially secure in the long run. The truth is that regardless of how much you earn, you won’t ever be truly financially solvent if you consistently spend much more than you earn. So be honest with yourself and do the math to figure out just how much purchasing power your current income will allow you. You can save money by making your own meals which will probably be cheaper and healthier than anything you could get at a restaurant. If you are the coffee drinking type, you could invest in a coffee machine which will prove to be much cheaper than your daily stop at the local coffee shop in the long run. These may seem like minor things to the average person but the truth is that these little money savings tend to add up, eventually redounding in more financial freedom.
Please note that the major obstacle here will be your own emotions because as you adopt the psychology of living beneath your means, you will see many of your peers doing the exact opposite. You might have to drive a Honda Accord or a Volkswagen Golf while your colleagues drive “M series” BMWs. When this inevitably happens, remind yourself that your circumstances are unique and comparing yourself to others is not sustainable. For all you know, that colleague that seems to have a new BMW every 3 years may have a trust fund from a very rich uncle. If you’re an honest hardworking man or woman with no trust fund, you cannot compete with that so please don’t try. Take pride in the fact that you can support yourself solely on your own income.
As a new business owner, you might have to borrow money from the bank to get started. As a young adult entering the real world after college, you will probably have to borrow money to purchase a house or car at some point. These types of debt are what we can classify as “good” debt because they serve very practical purposes such as keeping a roof over your head and allowing you the freedom of rapid mobility. On the other side of the coin, there is “frivolous” debt. An example of of frivolous debt would be borrowing some money to buy a super fancy gold chain which serves no real practical purpose. Tolerate the “good” debt when you need to and avoid “frivolous” debt like the plague.
Each time you get a paycheck, strive to save a percentage of it. You might have to start by saving a small percentage of your earnings and that is perfectly fine. The important thing isn’t necessarily the amount you save, but rather that you develop the habit of regularly putting away money for a rainy day. As you continue to earn more money and get rid of your debt, you can afford to put away more and more of your income each month. In time, you will have saved up enough money to afford some measure of financial confidence and freedom. Try to keep this up until you have saved up enough money to survive for ~12 months without a job.
We all have the odd family member or friend who is a bit “allergic” to personal responsibility. While you should love those close to you, it isn’t advisable to continue to feed money to these types. The reason is simple… these sorts of folks can be a bottomless money pit that will eventually bleed you dry. Moreover, giving into the pleas of people around you who don’t want to work hard is a losing proposition for all involved for the following reason: they won’t ever learn how to deal with money if you keep “helping” them. So instead of constantly giving your careless friend or brother more money when they ask for it, find them a job or find them a mentor that can help him or her develop a marketable skill or talent that will furnish them with their own earning power. In doing this, you would have played a major role in setting up another person for the longer term and they will eventually come to thank you for it.
A word of caution for the kind spirited amongst us. You might find it difficult to say no to people you love because of your kind heart but in this scenario, you have to develop a bit of a ruthless streak if you don’t want to go broke. To help you with this, realize that none of the parasites who bled you dry in the first place will be there to support you if ever you are hard up for cash. It is more likely that they will just move on to someone else who can keep encouraging their bad habits.
In the immortal words of Francis Bacon, money is a great servant but a terrible master. Follow the principles above to make sure your money starts to work for you rather than the other way around. While the points we have discussed here constitute a good starting point, you should still do your own research outside this article to learn even more. Wherever you are on your journey to financial solvency, we wish you all the best of luck. From all of us here at chubaoyolu.org, take care of yourselves and each other.
Oyolu B.C. Ph.D.
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