I’ve heard too many salary earners blame their low disposable income on their employers, their spouses, the economy, the government and even spiritual forces; everything except their ability to apply discipline to their money management. You yourself may have even uttered the words, “If only I made more money…..” at some time or another.

The truth is, you can hardly ever earn “enough”. One of the common versions of Parkinson’s Law states that no matter how much you earn, your expenses will always rise to a level that will consume your extra income. I know of people who earn over N2 million a month in salaries and still borrow money frequently to tide them over till the end of the month. If you talk to many pay-day lenders, they will tell you that their best clients are salary earners, more specifically, bank employees because these individuals rely on near guaranteed future income to pay for present day expenses. If you get broke mid-month, month after month, it is most likely because of certain bad money habits you have. In this post, I am going to cover 5 reasons why you are always broke and proffer some possible remedies.

Immediate Self-gratification

There is a particular gentleman I used to know (I call him gentleman just out of courtesy). Whenever he received his salary at the end of the month, he would literally disappear from the face of the earth for a week. He wouldn’t show up for work and his wife and family wouldn’t know his whereabouts during the period. He would eventually turn up the following week, usually in the same clothes he was last seen in, looking dirty, scruffy and reeking of alcohol with bloodshot eyes and an unsightly brownish grey stubble on his face. From the euphoria of receiving bulk money, his monthly practice was to meander between bars, brothels, betting shops and God knows where else, reveling in a hedonistic orgy of all manner of sin. He would spend his entire salary in this week and get so broke that he wouldn’t even have money to either feed himself or even go home from his workplace.

I trust that your case is not this bad but if you were to be honest with yourself, you practice your own form of this self-indulgence to some extent. Immediate self-gratification is the number 1 reason for most people being broke. Once they receive their salaries or any windfall that would help them reduce their debt or purchase a much needed asset, their thoughts go towards that $1,000 hand bag they have been obsessing over or the latest N150,000 smartphone.

If this sounds like you, I have some tips at the end of tis post that can help you control the urge for impulse spending or self-indulging purchasing patterns.

You Don’t Save

Many years ago, I shared the George S. Clason book “The Richest Man in Babylon” with a former colleague of mine. One of the 7 cures for a lean purse shared in the book is, “Start thy purse to fattening.” The principle behind that simply states that you should save at least 10% of your income for yourself and live on 90%. After reading the book, he returned it to me saying, “This book cannot work in Nigeria!”. My friend’s excuse for not being able to implement this was that even the 100% was not enough to live on, how could he and his family live on 90%?

Saving consistently helps you build a reserve which will come in handy on “rainy days”. You need to be quite disciplined about this to make sure that every day is not a rainy day however. I had no ready made response to my friend’s statement at the time but over the years, I’ve observed many peoples’ financial situations and have concluded that even in lower income brackets, many are still living above their means. Let me make my point about living beyond our means with this example. A young man approached his uncle (who happens to be a senior friend of mine and has close over 25 years banking experience. The young man mentioned to his uncle that he had just gotten a job in a bank head office in Lagos and because he will have to move to Lagos from Benin, he would like his uncle to assist him with money to rent a flat. My friend was livid with his nephew. He later shared with me the tongue lashing he gave the young man. My friend had come to Lagos under very similar circumstances over 20 years prior. He didn’t have a place to stay and he definitely didn’t have an uncle who would “assist him”. What he did was to make contact with a friend’s older brother who was working in Lagos and squatted with him. He squatted for close to a year with different friends until he had saved enough to get a flat of his own. He recalled that at some point, he was squatting in a colleague’s flat along with 4 other young men and each of them, one by one, moved out into a place of their own with money they had saved.

I think I’ve managed to make two points with this story. Firstly, that with little money and dedication, can save enough to rent a flat in under one year (I hear some people saying, “Not in these days!”). Secondly, that it did not occur to my friend’s nephew that dropping in social status in order to fulfill a greater purpose is at times a necessity. Squatting was not an option he had even considered. If saving 10% of your salary means that you have to stop renewing your DSTV subscription for a few months or that you ration the hours you use your generator even tighter, so be it. As George Clason’s book says, pay yourself first. What many people are doing is distributing their hard earned salary to all and sundry. Pay yourself first as you collect your salary. You deserve the first bite, after all, you worked for it.

Back to my friend who I had shared the book with. What he didn’t want to consider is a drop in lifestyle. To him, all his expenses were non-discretionary and there was nowhere to trim the fat. There were no sacrifices he was willing to make. He didn’t consider that walking an additional 10 minutes from his office to another joint where their lunches are on average N100 cheaper than the more convenient place closer by could save him N2,000 a month. He didn’t consider that if his wife cooked his lunch and packing it daily, he would be eliminating the midday lunch expense line altogether (over N100,000 a year).

Enough Talk, Act Now

Commit today to saving 10% of your monthly salary. It’s the first step out of being broke and leads towards building wealth. It’s one of those universal principles that cannot be refuted. Open a savings account today in your bank or preferably another bank other than where your salary account is paid into. Don’t ask for an ATM card, even if its issued anyway, don’t take it around with you in your wallet. Remove any other source of temptation to access the money. Do this today and transfer 10% of your next salary in it and every other salary going forward. You will learn to adjust and you will also eventually have that confidence boosting feeling of knowing you have cool cash in the bank.

Before you receive your salary, plan out exactly how you will allocate your expenses. As said before, pay yourself first with 10%, allocate some of the money to debt repayments, some to feeding, petrol for your car or generator, some for a relative you are supporting and so on. The allocation will be based on priorities. If there is any money left after all these other priorities, you can use the money or a part of it to but that handbag or that smartphone. You may find that after allocating money to your priorities, you can’t afford the item.

Visit www.talkingmoney.com.ng for Part 2 and other personal financial management blog posts.

Very educative, one other thing is many people don't have budget or they have but are not dedicated to it
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Maccoy1:
Very educative, one other thing is many people don't have budget or they have but are not dedicated to it
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Thanks. Look out for part 2

People should join those office co-operative where a percentage (18% in my case) of monthly salary is automatically removed right before you get the salary alert. That way even if you are a big spender, you adjust yourself to the net income you get after co-operative deduction. The bulk sum, after some months, can then be used to fund major projects like building of houses.

this post is so timely. I don't what is happening to me. Of recent i have being blowing cash like no man's business.
I am waiting for pt 2.

To read the continuation of this post, please follow the link below:
http://www.talkingmoney.com.ng/why-you-are-always-broke-part-2/