Outgrow low and middle class mentality, by Ola Emmanuel –
Money lessons are very fundamental to running a successful business. If you lack financial intelligence, you may not have the discipline you need to manage business funds. As an entrepreneur, you have to outgrow the mentality of the low and middle class who always interpret liabilities as evidence of success and achievements.
The poor and the middle class acquire liabilities that they think are assets. The low and middle class, because they want to appear as people that have also made it, spend money on liabilities that they think are assets. It is therefore necessary that you know the difference between an income-generation and wealth-creation assets and what liabilities are; and ensure that business funds are expended on acquiring assets. An asset brings money into the purses; while liabilities take money out of the pockets. You need to understand clearly: is what you spend money on demanding more money for it to be in good condition or it could generate money itself and leave you or your business with surplus? How you handle your personal money will influence how you will treat business fund.
The way you spend money shows the kind of person you are and the kind of mind you are bringing to running a business. For us to know that you are somebody who can own a business or can build enduring wealth, a fundamental sign is ability to save some amount of money even when you are confronted by too many needs to meet. If you have the habit of spending all or above the money that comes into your hand, it may be difficult to run successful business. You need to therefore develop your money management capacity, starting with your personal finance.
How? You must understand that you are an employee in your own business. Make it a habit to always pay yourself a determine wage or salary as you pay other staff members working for the business. When you earn personal income, also ensure you pay yourself first from that personal income (your salary or wage) before you start spending the rest on your personal needs. No matter how small the money is, you must remove a part as savings before you begin to spend the rest. If you pattern is to spend money either on basic needs or paying other bills, you are only existing to prosper others.
If you pay others first (bills, purchases, money-gifts, etc.) before you remove your own savings, you are operating under weaker financial energy. The drive and passion to earn more to pay yourself will be weak. You don’t see reason why you must really run to pay yourself. You may likely relax and wait for happenstances. But if you pay yourself first, you know you really need to run to make more money to enable you pay others – in order to avoid being bullied or embarrassed. If you operate financial model whereby you pay yourself first and then others, you would have developed stronger, mentally and fiscally and the chance of living a pleasurable retirement years is brightened.
Pay yourself by allotting money to your savings and investment account immediately money comes into your hand. It requires some level of mental toughness to build a secured and better financial future. You get the toughness when you are driven by the need to meet financial obligations after you must have first paid yourself.
Audit your money spending habits:
Having taken care of income management, you need to also audit your money-spending habits. Do you make up to the money you spend? Anyone who spends above his or her income is clearly operating a bad money habit. With the way you spend money, can you sincerely say that your financial future is safe and guaranteed? Budget properly for food, education, your personal development and knowledge acquisition, your wards, social engagements, home front, your recreation, utility bills, wear and tear of properties, etc. Do you really need the next product you are thinking of buying? Can you delay spending money on that product till another time? Is the product necessary, so urgent and so important to your immediate well being or it can wait till other time? Make it a habit to always classify products you want to buy into necessary, important and urgent categories. Move the money earmarked for not-so-necessary, not-so-important and not-so-urgent products to your savings and investments. Plan your purchases before you set out to spend. Do you always think of what to buy and make a list before you make your purchases or you just buy as the products catch your attention? It may not be proper to consider changing taste and lifestyle when additional expenses cannot be conveniently accommodated by your incomes. What do you need to put in place before you can conveniently embark on acquiring certain products? Is the product you want to buy too expensive and can you really say you get value for the money you want to pay? Are you paying higher for the avoidable goods and services? Do market surveys to find more competitive prices of products. What exactly do you need? Is what you want to buy a need or a want? Learn to close your eyes to products of no real value.
Ola Emmanuel is a business planning and cooperative consultant.
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