Breaking free from financial inadequacy

In order to successfully navigate the road to financial prosperity and freedom, we need to avoid certain pitfalls. Some of these pitfalls are self- inflicted, arising from bad financial habits. Whilst others arise from inadequate preparation.

The most common reason for financial failure is a lack of financial literacy. In order to excel in any endeavour, we must understand its workings. Most of us do not understand how finance works. Some borrowers are shocked when compound interest is added to their loan balances. Some of us cannot interpret the financial information required to make informed decisions whether in daily life or in investments. We must devote time and resources in familiarising ourselves with financial terms and concepts if we want to break free from financial inadequacy.

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We must also develop financial discipline. Our discipline could be supported with financial tools, fintech apps and standing orders that help us to stay committed to our financial goals. Procrastination is the most common evidence of financial indiscipline. If you find yourself continuously postponing the implementation of your savings and investment plans, you should support your resolve with a bank standing order that debits your account and credits the investment monthly without recourse to you.

Some people don’t even have financial plans or even a monthly spending plan (budget). How then can they break free from financial inadequacy? A common proverb applies here – those who fail to plan, plan to fail. Let’s get serious with financial planning. Plans are easily developed using the personal finance management apps in our mobile phone stores.

It is the absence of a financial plan that facilitates this next habit – the need to conform. Many people spend money trying to compete with friends and conform to certain standards of visible affluence. Many times, these expenses are unplanned and are created by an emotional need rather than a physical need. A person who is diligently pursuing financial goals has no interest in competing with people in the rat race. Let us avoid joining the rat rate, because even when you win it – you only become the king of rats; you’re actually still a rat. Let’s leave the rats behind and fly solo like the eagle.

Joining the rat race usually leads to living above one’s means; spending more than you earn. This in turn, leads to borrowing in order to meet the shortfall created by the wasteful lifestyle. Borrowing for consumption is an evidence of financial illiteracy. Let us exercise discipline and restraint in consumption. Borrowing to buy televisions, cellphones or clothes puts one in financial servitude. Borrowing should be done for productive reasons and not consumption. Consumer finance is a major driver of many economies but those who indulge in it become bound by it; juggling credit card balances and being one paycheck away from financial ruin. All personal finance literature advise us to pay off credit card debts and live within our means. This is good advice, which if we obey would help us to achieve financial freedom.

Living without a financial cushion exposes one to financial failure. Many of those who do not have a cushion against the financial effects of negative events are unable to return to financial prosperity after them. A good financial planner hopes for the best but prepares for the worst.A financially literate person has investments in cash and near cash items that could be used to absorb shocks from unforeseen events. Life is full of uncertainties. Whilst we have faith that things would always be good, we should remember it is the Scriptures that advise us to learn from the ant. The ant prepares for the time of lack by putting something away during the time of plenty (harvest time). So, even the Scriptures encourage us to prepare for unexpected events.Some unforeseen events require huge financial expenses that only an insurance policy can provide. We should have adequate coverage to provide financial support in events like fire destroying our businesses, death of the family breadwinner, accidents that result in physical disability or car accidents. A person who receives support from insurance after a negative event would recover from it and return to the path to financial freedom much faster than the man that has no insurance.

In conclusion, we see that breaking free from financial inadequacy can be achieved by preparation and discipline. Both are factors within our control, implying that financial freedom itself is firmly within our control. Therefore, let’s do what is required so we can live free!