The most common response to adverse economic conditions is to cut costs, go on the defensive by looking inwards to make do with what you have rather than reach out to utilize growth opportunities. In football when you are some goals down, if you fall back to defend rather than counterattack, you put your defense under undue pressure and may concede more goals.
While there is nothing wrong with cutting costs, especially where you have waste, often the best form of defense is to attack. One key thing we need to navigate through life is wisdom. There is a time to focus on cost-cutting and a time to focus on growth. If you cut costs when you are supposed to spend on growth, you may lose the game. No one method holds well for all seasons.
As an individual or an organization, your ultimate focus should be on growth. What you focus on grows. The problem with a lack mentality is that you tend to focus on cutting back, looking for the cheapest, most discounted, etc. The danger is that you may spend all time your time and energy on saving money that you neglect growth. The reality is that there is so much you can cut back. By the time you scrape yourself to the bone, there is nowhere else to go. If you earn N100,000 per month, there is no amount of cutting back that will yield N200,000. That is why is you cannot become rich by saving only. You become cheap. In a home, if you are perpetually cutting back, you make everyone miserable and at some point may provoke a revolt. Things are supposed to get better, not worse.
I have been a victim of a lack mentality up to some years ago, and it is a mental battle I am still fighting as circumstances (like we have found ourselves today) can make one fall back to old patterns based on what you read in the papers and watch on TV. Anytime I had a big project, for example, a building project, I will move to a cost-cutting mode and channel most of my finances into the project. I would cut all entertainment-related expenses, delay repairs, and generally ‘manage’ so that I can meet my project goals. Virtually everything was banned. Anytime there was a need, I would remind the person I was building. I made everyone at home miserable. I was held hostage by a lack mentality. I believed you cannot eat your cake and have it. I have come to realize that you can eat your cake and have it in this context. It must not always be either or. You can have both if you want. If you want something bad enough, you can figure out a way to make it happen.
What do you do when your income drops?
As a nation, we are in a middle of a cash crunch that brings back memories of the early 80s, essential commodities, import licenses, austerity measures, etc. It seems like we have gone a full circle. While the hunt for the guilty is in full swing, as individuals, we can use this as an opportunity to grow. There is a school of thought which I used to subscribe to, that we should shut our borders for a couple of years so that we can become self-sufficient in manufacturing goods and services for domestic use and export. While this may not be practicable due to World Trade Organization free trade agreements and our porous borders, it seems the crash in oil prices and the attendant weakening of the naira versus the dollar is gradually shutting our borders as imports become more expensive as the naira gets weaker. Prices of commodities in the market are going up, effectively shrinking disposable income. Technically, workers are having their income slashed as the same salary is buying less. In effect, it is correct to say the income is going down.
What should be the correct response? A lack mentality will respond by cutting costs while an abundance mentality will respond by growing income. There is nothing wrong with both approaches; it is just what it is. It is like the case where someone says something cannot be done and another says it can. Both are correct. If you are asked to choose between cutting costs and more income, which one would you go for if you had a choice? That choice is always available and it does not depend on your boss, employer, or business environment. It is in the mind. There is something you can do to make more money in addition to your primary income. It is your job to pay the price to find out what it is.
If all you depend on is your salary, since your salary is fixed outside your direct control, that limitation connotes lack and if you accept it may lead to a lack mentality. There are options you are not aware of because you don’t believe they exist hence are not looking for them. If you believe there is no way out, you won’t bother looking. This is why knowledge is so powerful. It opens your eyes to see more.
As Charles Dickens in A Tale of Two Cities aptly put it, “It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness…”. Everyone is not impacted the same way by this crisis. Flights outside the country for summer are still fully booked. High-rise buildings are going up. People are suffering and people are enjoying. Businesses are folding up and businesses are starting.
Are you going to shrink or expand? Are you going to cut costs or grow your income by tapping into emerging opportunities? It is actually a matter of choice, and there are no right or wrong answers. It is simply a matter of what you really want – not wish for but willing to pay the full price to achieve. When this is all over, and it will be over one day, how you come out depends on whether you decided to look inwards and shrink, or bold enough to look launch out and grow.
