Guiding Principles of Spending

Photo by Andrea Piacquadio on

My husband and I are very aligned when it comes to our views and strategies about spending. He, however, is a little more proverbial in his principles on money than I am. Today I will share with you 3 of his guiding principles.

  • Save like you are going to live forever, and spend like you are going to die tomorrow. My husband learned this principle from his grandmother, and it does a great job of embodying the meaning of financial balance. Some people save everything for the future and never get to enjoy the fruit of their labor. They are so afraid of going hungry in the future, or having debt till they die, that they forego all the excitements of life. Granted these fears are valid, it is, however, important not to let the worries about tomorrow consume you to the point of anxiety or depression, and always remember that financial freedom is a journey and not a prison. On the other extreme are people who eat both their seed and fruit. There is wisdom in knowing the difference and ensuring that you sow your seed and eat your fruit. An adequate understanding of how to protect and nurture your seed is imperative for financial freedom. If you have been following my blog, you know how much I stress net income (NI), this is because net income is your seed and the only way to grow your equity
  • Ko le si ikun, this is a Yoruba sentence that means building a house in your belly in English. It is a statement of caution that means consuming your assets. It is closely related to consuming your seed, except that it acknowledges the net future value of your investment. It may be easy to fall into the trap of seeing your seed as small and consuming it as inconsequential, but your mindset needs to be futuristic, in the sense that you recognize that this seed today becomes a large oak tree in the future. When your expenses do not give space for investments and savings, and you are consuming all your income and not growing your assets, you may as well be building a house in your stomach. Whenever we are budgeting for our family, and I get excited about all the nice things I want, my husband will jokingly ask me; how many rooms are in that house you are building in your belly? Rude Right!!! lmao
  • The opportunity cost of expense versus investment: While the two above are more of overarching financial principles, this one is more analytical and specific. When we are in the middle of a project like building a house, and there is an expense that we want to allocate cash for, say traveling on a vacation or eating out. Before committing to the expense, we would ask ourselves the following questions: how many bags of cement or how many boxes of flooring or light fixtures, furniture, stocks, school fees blah blah blah is that? Because we want to be sure that we have weighed the reward of this expense against the future value of the cash allocated. What this does is that it helps keep our projects, assets, and investments top of mind. While vacation, eating out, and other leisurely items are great for you and the value that they contribute to your wellbeing can not be overlooked, it is in good financial posture to take a moment to do the opportunity cost of that expense.

In Summary, when allocating cash aka spending, always ensure that you tick the following off before committing.

  • Am I balancing my happiness today with my financial comfort tomorrow?
  • Is this money I am spending my fruit or my seed?
  • Am I consuming all my income?
  • What is the opportunity foregone by spending?

If the answers to all the above are positive, then go ahead, spend, and enjoy your life, because you only live once YOLO

Join me next week, as I give you some tricks and tips to bursting the expense bubble. Remember to click the follow button.

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