Most people believe if we are prudent we will not have financial challenges. All you need to do is try and live within your means. We think money management skills come naturally as part of our growing-up process – when you get to that bridge, you will figure out a way to cross it. The focus was solely on going to a good school, reading a good course, making good grades, and getting a good job.
With that, you are guaranteed a good life. Hardly any attention was paid to other required competencies – interpersonal skills, communication skills, emotional intelligence, money management skills, leadership and entrepreneurship skills, etc. We all focused on academics as the only ingredient for success in life.
I grew up in a prudent home. Both my parents were teachers. There were no piggy banks in those days, so my parents kept our money for us whenever a visitor gave us money. We were taught to value things. If you damaged something at home, the money to replace it came from our virtual piggy bank. We were not used to luxuries as the reward for that generation of teachers was in heaven. It was drilled into our skull that money does not grow on trees, all fingers are not equal, etc., and reminded at every opportunity of the sweat and toil that went into earning the little money we had.
One would think that when you grow up in such a home, you have the basic money management skills to manage your finances. My first ten working years proved me wrong. Reading ‘Rich Dad, Poor Dad by Robert Kiyosaki made me realize that I was simply earning to spend, living within my means, and heading nowhere financially after years of hard labor and long commutes. I was turning cash to thrash with virtually nothing to show except a long service award. The difference between me and a new hire was a rented apartment full of stuff and an album of memories.
Learning is a choice
Basic money management skills do not come naturally. You need to consciously learn the basics, and the learning never ends as anything remains static. Reading a book or attending a seminar does not mean that you will automatically get it. It is possible to learn and still go back to your old ways. You need to get continuous exposure till you get to the tipping point when change happens. The book Rich Dad, Poor Dad was a trigger for me. I was not hearing it for the first time. My Pastor taught us about finances until he almost went blue in the face. I was not there yet.
What I had read before, heard, gone through, etc prepared me for that moment when the light bulb went on it my head and I finally got it. The way he said it triggered it for me. Many have read the book and moved on without any earthquake inside. For many people, it was ‘Think and Grow Rich’ by Napoleon Hill. I struggled over that book till I finally made it to the finish line by listening to the audio version and it did not do much for me.
There are people we connect with. They make a point that drives it home for us and move us to that space where we start to take action. It is our duty to keep moving and keep learning until we locate that place.
Whether we like to admit it or not, money plays a crucial role in our lives and is the foundation of other freedoms. The lack of money can be a handicap in your exercise of other freedoms. This is one area we need to be knowledgeable about so that we can keep money in its place – a servant, not a master.
Your understanding of what an asset or liability is in terms of cash flow, or lack of it can mean the defense between a lifetime of financial struggle or having money work for you so that you focus on what matters most.
You can be a banker or accountant, and help prepare the books but still be financially illiterate which will reflect in your financial struggle. You can be a broker and be broke yourself. It has nothing to do with academics or textbook definitions. It is about understanding the fundamental laws of money and learning to control yourself.
You need to know the meaning of basic terms – financial independence, financial freedom (they don’t mean the same thing, although they are often used interchangeably), assets, liabilities, pay yourself first, asset allocation, good debt, bad debt, different markets, asset classes, etc. The more you know, the more options you have. Ignorance is not cheap. It will cost you dearly.
It is about control
The more in control, you are, the happier you feel. You can influence outcomes. The more you know, the better questions you ask, and the better answers you receive. You cannot become better in any area through wishful thinking or depending on experts to do it for you. You need to consciously educate yourself, and while at it, if you have children, also have teaching sessions with them to pass on what you know. There are also personal finance books and games for children.
It is easy to criticize what we have no control over than to work on changing what we have control over. We can castigate Nigeria all day long for its low reserves, and economy too dependent on oil after decades of paying lip service to the diversification of the economy; are you innocent of the charges? You can blame your parents for gaps in your knowledge, what are you doing about it now you know?
Are you being proactive or reactive?
Excuses aside, how do you rate yourself 1 to 10 on Basic money management skills? Are you happy where you are financially? How do you plan to improve on that?
There is something you can do with what you already have to move you toward where you want to be. If you don’t know where you want to be, you are not alone. Most people don’t. Take all the time you need and figure it out first, because if you don’t know where you are going, no one can help with directions.
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