Financial setback, in the face of the economic instability in Nigeria, while not shocking has led to the prevalence of mental breakdown in individuals. But all hope is not lost, there is a solution.
By Lanre Olusola, The Catalyst
In today’s economic climate, personal bankruptcy has reached an alarming rate. I will be using data from the US and the UK to buttress my points as we can’t find proper data in Nigeria. Studies show that more than 1.5 million people file for bankruptcy every year In the US alone. Every day in the UK, about 300 people are declared bankrupt or insolvent, i.e. 1 person every 5 mins 5 secs.
Another 25,000 lose their homes through repossession each year. Millions are living on the edge of financial meltdown as they struggle to make ends meet, meaning that the numbers may continue to rise. A few years ago, the Citizens Advice Bureau reported that they deal with 6500 new debt cases every working day. That’s a staggering 1.7 million people facing problems which they simply can’t cope with.
Most significantly, nearly 97% of bankruptcy filings are made by individuals, not by businesses. In Nigeria, the situation is worse I am sure. With Nigeria being declared the poverty capital of the world, it is no secret that people are becoming poorer and more businesses are shutting down as they struggle to stay afloat. The reality is that more than ever, more people face serious financial difficulty today.
In our society today, some of the most common reasons why people experience financial setbacks include Medical expenses, job loss or business failure, credit and debt, unbudgeted expenses and overspending, divorce, separation and more.
Being in debt, broke, and unemployed can lead to major financial stress that ultimately culminates into depression and other mental health challenges. However, the converse is also true: depression can precipitate a financial meltdown.
To bounce back from a major financial challenge and start to build again is a function of several things from Psychological to Emotional; Strategic to Tactical; Discipline and finally, understanding and following specific principles.
If you’re suffering from a serious financial setback, the first thing you need to realize is that you are not alone and that there is no setback you cannot recover from.
A 2014 report from the American Psychological Association shows that among more than 3,000 adults surveyed:
72% reported feeling stressed about money within the previous month.
50% reported having no emotional support and feel depressed because of financial stress
Another recent study carried out on 1000 US adults by the mobile-banking company, Varo Money found that, while a huge 85% say they “sometimes” feel stressed about money, 30% say they’re “constantly” stressed about their finances. Understanding our environment and current economic status, it can be inferred that the numbers are way higher in Nigeria and Africa at large.
“A bucket can only contain the quantity of water it can, irrespective of the amount of water in the universe; Likewise your hands can only hold the amount of money your mind can hold, irrespective of the amount of money available in the universe” – The Catalyst, Lanre Olusola
Bouncing back from financial challenges is the first mind over matter. You need to understand that failure is a natural phenomenon for successful people. I always say, failure is the gateway to success. Learn from every failure so that you can become emotionally intelligent. Failure learnt from is not failure; but an advantage and feedback on how to do things better.
Many things are responsible for why people find themselves in trouble financially and if you know and avoid these mistakes going forward, things will begin to look better for you financially. I’d share a few of these mistakes and some recommendations.
1) Many fail to set and live on a budget.
TO TURN YOUR FINANCES AROUND, YOU MUST SET & LIVE ON A BUDGET.
This should be common sense right? But you find that not many people create realistic budgets around their income and needs. To maintain a balanced and healthy financial life, you must learn to practice budgeting and living within your budget.
Start budgeting by tracking your everyday expenses, to the last dime. Based on your historical spending pattern of previous months, differentiate your critical immediate daily needs from your monthly needs and finally from your wants. Color-code these three in Red, Yellow and Black respectively. Then to budget for subsequent months eliminate the black wants (expenses) and set the limits of what you can spend, and write a list of what you really need to spend on, month in month out. This is a very simple practice that can save your life and stop you from further digging a debt hole for yourself.
2) Failing to put an emergency fund in place
TO TURN YOUR FINANCES AROUND PUT IN PLACE AN EMERGENCY FUND.
An emergency fund is the money that will help you live your life without lack in times of difficulty if, for example, you lose your job or your business is going through a dark patch. The rule of thumb is to have up to 6-12 months of expenses saved up. Having an emergency fund is one of the most important financial habits that can tide you over when you face financial difficulties which can happen to anyone at any time.
3) Living and Spending Beyond Your Means.
TO TURN YOUR FINANCES AROUND YOU HAVE TO LIVE ON LESS THAN YOU EARN
You have to learn to abase and abound – cut your coat according to your cloth and not according to someone else’s specifications, expectations, cloth or size. Now, this is particularly a very bad habit for black people because we are always trying to keep up with the Joneses and outdo each other. We don’t live our own lives, walk our own path and run our own race. We daily try to live the life that we see other people living failing to recognize that we are all different and going to different destinations.
It’s okay to own a comfortable 4 bedroom home that you worked very hard for and bought with your own sweat money (not a big 10 bedroom mansion that your friend inherited from his father who inherited it from his father).
It’s okay to have a good functional and regular car(Not an expensive SUV).
It’s okay to dress very well rather than wearing designer clothes and always following fashion trends when you can’t afford it.
4) Not having proper insurance on possessions, health, and Life.
INSURE YOUR POSSESSIONS, HEALTH, AND LIFE FOR THEIR CURRENT VALUE
Make sure you update the value of your possessions such as your car, house, watches etc. and insure them for their replacement, not purchased value, because the whole essence of an insurance is to be able to replace what you lose on the date you need to replace it with the money the insurance company gives you after their financial adjustment exercise.
Especially in this season when the exchange rate of the dollar to the Naira has tripled in the last couple of years so what you bought for $50,000 a year ago at an exchange rate of 160 Naira to 1 dollar will give you slightly less than half of the value today at an exchange rate of 363 Naira to 1 dollar. Hence, you won’t be able to replace the same possession even if the insurance company pays you. Protect yourself from any unforeseen circumstances such as fire, theft, accident etc. You never know what might happen in the future.
Tip: Do your due diligence on the various top insurance companies. Know their history and products and try to use a single insurer so that your cover is total and discounted
5) Procrastinating and waiting for the perfect opportunity or time to save and invest.
START SAVING AND INVESTING TODAY.
There will never be the perfect time to save or invest. If you don’t develop the attitude and habit with the little you have today, you will never do it with the plenty you get tomorrow.
Many people are cheated from doing the right thing because of procrastination, wrong advice or fear. When you get any inflow, ensure that you first pay yourself a percentage that goes into securing your financial future. There is no amount of money too small or too big to put away but the key is consistency.
6) Getting into the habit of buying every latest or new thing.
BE DISCIPLINED; SAY NO; DON’T BUY WHAT YOU DON’T NEED
There is nothing new that you buy that once you pay for it and leave the shop with it that it doesn’t begin to depreciate; especially cars, electronics, phones etc. These things are really not assets but liabilities or consumables, as their value depreciates after purchase. Why not invest your money in instruments and things that the value increases, even after purchase?
7) Living only for today
FOCUS ON THE PRESENT BUT LIVE AND SAVE FOR TOMORROW
Yes, you may have made some bad financial decisions that led you to experience setbacks but your tomorrow is based on the decisions and actions you take today. There are 3 dimensions of financial focus: Short, Medium and Long Term.
One of the greatest financial mistakes anyone can make is to permanently be myopic i.e. focus exclusively, living for and financially planning for the short term. This attitude causes wasteful and foolish spending habits. People like these, unfortunately, attract their kind and therefore surround themselves with similar foolish people.
As we know, “He who walks with the wise shall be wise but the companion of fools shall be destroyed” (Proverbs 13:20). Short term people will never see any sense in saving and investing for tomorrow, today. They don’t have the ability to delay gratification today for a better tomorrow. Being able to see and plan long term is a gift that should be taken seriously.
8) Investing in a Pyramid scheme
A major cause of financial setback in Nigeria is get-rich-quick schemes. Recently, many people who invested in financial pyramid schemes like MMM, Swiss Golden, etc have had their fingers severely burnt. Months or years after, the schemes go burst. So many others have come and gone the same way. Don’t get carried away when a particular investment is going good, human nature tends to think this good streak will go on forever, so we sink even more money into it.
9) Not having a personal professional financial advisor and getting financial advice from just anyone
GET A PROFESSIONAL FINANCIAL ADVISOR
If you go to a doctor when you need medical advice, an architect when you need to design a home, a structural engineer to help build your home or a physics teacher if you want to excel in physics so also you need to get financial advice from a proven and time tested professional financial advisor
Without a proper advisor, you could be heading for financial oblivion.
A professional financial advisor will first assess your financial wellness status by diagnosing any financial illness before he prescribes any intervention
Don’t take financial advice from your pastor, imam, traditional ruler etc. if they don’t have a financial background and experience. They’re there to give you spiritual guidance. Financial and spiritual guidance are on two different divides; “One is Godly the other Worldly” and as such, the principles will vary as far as the heavens are from the earth.
10) Not managing your emotions around money
“If you cannot manage your emotions, you cannot manage your money”
– Warren Buffett.
Did you know that:
Money is the leading cause of stress in life and relationships and the Number 1 cause of divorce, separation, and Dis-Ease? According to surveys conducted by various bodies, 35 – 45% of all respondents experiencing major relationship stress and divorcees said money was the primary cause of their friction.
Money and stress also go hand in hand, depending on your relationship with money i.e your psychology around money. Most life, marriage and relationship dreams fail because of lack of money.
Your psychology, perception, values, and convictions about money based on your background and past experiences, make money a critical source of stress, tension and emotional trauma for you.
Research now states that 85% of success is dependent on how emotionally intelligent you are. Master your emotions and you can master your success. Search yourself before you wreck your life because of money.
So my challenge for you is:
What are you going to do about your experience around money?
What does money really mean to you?
How much influence does money have on your moods?
Why does money have so much influence on you?
How do you behave when you have money?
How do you behave when you don’t have money?
What’s your relationship with money? The genuine answers to these questions, give you an indication of where you are with your emotions around money
If you are experiencing a financial setback or working to get back up from financial losses, I strongly recommend that you get a financial expert and a life coach to work with you in this regard.
To help you for free within the next 10 days, download our digital coaching app, “CoachMe Online” from your App store. We have scores of certified coaches in different specialized fields who are waiting to coach you in your desired area for free. These coaches will work with you in real time to transition from where you are currently now, to where you would love to be.
Editor’s Note: This article was originally published in The Spark Magazine. Find the magazine here to read other articles.