‘You can never be a millionaire working for someone.” This cliché carries wisdom behind it that most working-class citizens relate with. This is a class of hardworking and mostly well-educated people earning middle-income. A majority are city dwellers with urbane longings and fast-life aspirations. So why does this group of people feel like they’re losing money?
Wealth coach Steve Down confesses that he’s encountered many young men and women between 25 and 35 years of age, who have zero balance in their bank accounts after more than five years’ employment in lucrative positions.
These are not isolated incidents identified among outlier spendthrifts. A majority of the employed suffer a similar fate. Steve Down identified 3 primary causes that underlie every form of financial ineptitude prevalent among our working population.
1. Absence of deliberate long-term thinking. Financial security and freedom can only be achieved when every financial decision and action aligns to a goal. The goal setting, financial planning helps one make decisions necessary to build a routine. Good routines in the long-term lead to achievement of goals and ultimately, financial success.
2. Expensive spending habits. Spending that goes beyond our basic needs such as education, shelter, food, and entertainment, is not well tracked. For most people, a lot of what they spend on that they don’t need can only be categorized as financial leaks. Uncontrolled and untracked spending habits while having the same amount of income becomes expensive and unsustainable. Good money management helps one have habits that contribute to healthy finances.
3. Minimal investment in financial security and gaining assets such as bonds, stocks, and real estate. Instead, resources are wasted on liabilities such as cars, electronics, and fashion accessories together with the ostentatious display of apparent affluence such as weddings, holidays and parties.
For example, a young couple decides to spend their combined salary on a lifestyle they can ill afford. This can easily force the couple to seek a salary advance from their local banks. They borrow to sustain a lifestyle of consumption without saving or investing. Their children often attend expensive private schools while they reside in exclusive neighbourhoods that charge a premium for rent. Many are servicing a loan they took to fund a recent lavish holiday and still, have to maintain and service a fuel-guzzling SUV.
A young person in similar circumstances vows to manage his finances, but he never gets around to sorting his debts and cutting down his expenses. So the cycle of borrowing and indebtedness persists and they feel like they’re losing money.
Unfortunately, if a misfortune such as sudden illness or company layoffs befalls this couple or the young person, they are a week or two away from financial distress.
One aspect that could mitigate the financial catastrophe in waiting is an immediate injunction on spending, a deliberate plan to pay debts, and a drastic restructuring of their lifestyles.
Unfortunately, without sound financial literacy, this is unlikely to occur. A whole generation of productive men and women face a potential financial disaster unless they start learning now.
At Financially Fit, we believe that good money management is part and parcel of a wealth mindset. By practising the principles of wealth, you begin to control your spending and grow your income.
You can avoid feeling like you’re losing money, even with a decent-paying job. Decide how you want your finances to be and set goals to achieve this. Always think long-term and track how you spend your money monthly. Drawing a plan to pay off all your debts will also help you get out of debt that takes away your income.