Borrow, Spend, Invest, Repeat!

Borrow, spend, invest, repeat!

How do you get from the point where you’re living from paycheck to paycheck to the point where you constantly have more money than you can spend? Cash flow management. It is an important part of personal finance that ensures that you are minimizing your expenditure and maximizing your income in the smartest way possible. It’s a lot like budgeting really but permit us to say it’s a bit more deliberate; more strategic.

Picture this: Ariyike recently came across one of these Agric investment products that was offering a 28% return in 7 months. It seemed like too good an opportunity to pass up but when she looked her account balance and her expenses for the month, she realized she couldn’t afford the investment. Did she let that stop her? Nope! She took out a loan, made the investment.

Ordinarily, this shouldn’t be a bad thing. However, when you consider that she is already making monthly repayments to a relative for a loan she took out last year and is also servicing a debt to one of these quick loan companies, you can see how this is a problem. The irony of this
situation is that Ariyike has an investment with a money market fund, is a lender on the FINT platform and has savings in one of the FinTech platforms. Crazy right?

Essentially, Ariyike is haemorrhaging cash both on the investment and debt fronts. The question one is then forced to ask is: what is the strategy here? Another question is: are the investments she is making worth the debt she is accruing? While we cannot see the future, we can only hope that she does not hit any significant bumps on the road as she goes through life or she will be in a serious financial bind.

A better strategy would be for her to allocate her money in a manner that consistently reduces her debt, increases her income, prepares for the future but still leaves her with enough to meet everyday needs or emergencies. Seems like a dream, right? Not really. Here are few things she
– and you too – can do:
Step 1: Identify all current income streams. Don’t take future earnings into account when planning for today.
Step 2: Identify all short, medium, and long-term goals. Put into proper perspective what you need to be focusing on now.
Step 3: Set aside a proportion of the income for everyday needs. If you cannot meet your everyday needs, you will run into an unhealthy cycle of debt.
Step 4: Set aside at least 2% of income for emergency savings. If emergencies keep eroding your spending or saving cash, you will keep taking 1 step forward and 2 steps back.
Step 5: Focus first on eliminating debt. Trying to invest while suffering under mountains of debt is counterproductive.
Step 6: Once debt is properly managed, focus on investing for retirement. Once you can hold your head above water, you can plan for what you see ahead.
Step 7: Grow income streams. Cutting expenses is good; growing your income is better. More so, you can consider leveraging debt here to increase productivity.

Step 8: Allocate additional income to projects. Reward yourself for good money habits by allocating funds to the things you want.

We hope with these few points of hers, we can reduce a lot of the anxiety that many of us face when it comes to feeling like we never have enough.

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