Living Above your Income is simply a situation where you spend more than you earn on a monthly basis and you are left with nothing to save. In principle, we are to save at least 10% of your earnings. Sadly a larger percentage of people are in this category, the deception of most people is when I earn more I will save better, forgetting that spending and savings are habits which need to be cultivated over time, so I put it to you if you cannot save when you earn little you will not save when you earn big as your expenses grow as your income grows and it is a big pitfall that we all have the potential of falling into.
These people spend more than they earn. They are constantly living in debts or in and out of debts, they spend to prove a point; buy clothes and shoes of the latest fashion trends with a high taste for designer brands, cars, jewelry, travel abroad etc. to inform people around that they are big boys and girls. In order to satisfy these insatiable desires you buy things on credit (both the things you need and the ones you do not need) and at the end of the month you are either broke or you risk being embarrassed for not paying. At the end of the day, these set of people do not have savings at all. If you are living in this category, you cannot achieve financial freedom that you so desire.
Another challenge with people living above their Income is Competitiveness’ you must deliver yourself from competition if you want to be financially free, it is a must, never compare yourself with anybody, I had to deliver myself from it and it helped me manage my financial life well as I am not under any obligation to out shine anybody as I am living my life for me and not for anybody, mind you, I am not saying you should not dress well or eat well, what I am saying is you can do things well within your standard and never losing focus of the future, I am an optimist and I believe in a better financial life but it is a journey, some years back the best of my clothes were used clothes but I can't wear such again and even now I cannot afford some shoes now I rather pray they go on sale or I do not buy them at all, for now, the principle is understanding your present state and know that it’s a bus stop and not the final destination.
Another pit fall is peer pressure, any friend that will not accept you in your low state is not worth being your friend, one of my clients did an analysis of the “Aso ebi” she bought last year and we found out she spent well over Four Hundred Thousand Naira in a calendar year that is a lot of mutual funds before you judge my friend at least she can track her own expenses, how about you, you cannot even do a calculation of how much you spent last month on call cards on your phone, I am not a judge but I am passionate about how we can live our life void of financial embarrassment, trust me I have been there and it is not a good state to be in.
Impulse buying is another trap, people buy things they do not need or useful to them is a pitfall we all need to avoid, I twittered last week that “My wallet is not in my pocket, but in my brain, I think and weigh every purchase before I pay”. Some people felt it was cool some say it's extreme but I say that is the way to go. You need to have a hold on your expenses, have you ever asked yourself why you have chocolates and candies … at checkout/paying points in shopping malls and supermarkets, they want you to buy on impulse. We all have fallen into this trap of impulse buying at least once in a life time if not more as in my case (LOL). Impulse buying is just rash financial decision.
Bad financial habits (Faji), Womanizing, drinking, smoking, chocolate addiction and all sort of addictions and habits are other reasons why some people can save and are either LAI of LWI, do a rough calculation with me you take five bottles of beer every night, lets say you miss five days in a month you have taken one hundred and thirty bottles of beer multiply it with the amount and often times it will go with a bowl of pepper soup, that is why drinking joints will never go out of business and you, on the other hand, your good will gives you leverage to pay later when you are broke. Same thing goes for womanizing, chocolate addiction is called “chocoholic” and remember good chocolates are not cheap so you keep spending, we can go on and on speaking on the different reasons why people spend anyhow and do not have savings.
Living within your Income is similar to those living above their income the only difference is that they are not indebted and it is a thin line that is between the two and more often than not the people living within their income fall short and find themselves at the other end of being above their income.
LWI—living within your Income: These sets of people do not owe and do not have savings. They spend everything on their pay cheque, nothing reserved, though they try as much to save on a monthly basis, the only thing they have being able to achieve is living above debts which they fall back into a few times because of unforeseen circumstances
A simple formula:
Income – Expenditure = Debt, then you are living above your Income and if
Income – Expenditure = Zero, then you are living within your income
The purpose of this blog would be aborted if I make you feel bad about yourself and do not proffer solutions to the issues raised as I said in the first post, I am not better as I have lived in this kind of situation and I am doing well now, came out of debts after having been embarrassed and called names by friends with whom I was indebted, I hold them in no grudge cause they thought me to be a better personal financial coach.
You too can move from the above equations to the best
Income- Expenditure = Savings, then you are living below your income, the truth is your expenses will always be many and understand that you are not God that can meet everybody’s needs you need to apply breaks and take time out to think thoroughly about becoming financially free and live a good life.
You can join me in this #personalfinance campaign by sharing this blog with your friends and all that you know. We will be talking about LBI- Living Below your Income in our next post.
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