Recent ‘Painful’ Financial Lessons

As at the time I initially wrote this post (late July last year), my accountability partners had just reprimanded me for poor financial decisions and reckless spending. By the fall, I was really on-top of my finances (I think); however, this winter- let’s just say I couldn’t have stumbled upon this draft at a better time. 

Okay, without further rants, here are some lessons I learnt about personal finance last summer: 

1. I cannot afford to be lazy when it comes to my finances. Whether it comes to regulating my spending, going to the ATM weekly to withdraw cash as a form of self-discipline, dedicating hours to review my finances, or learning and researching about what financial options are currently available to me- I simply can’t afford to be lazy when it comes to my finances.

2. Budgeting is easy; sticking to one’s budget is hard (let no one deceive you). Last summer, I tried to stretch $70 in two weeks, and I failed. It was a rather interesting financial experiment and ever since then, I have tried different variations such as leaving my cards at home, holding onto just cash, ‘no spend week’s etc. This helped me account and think carefully about every dollar I spent, it was a crazy experience but, one I would highly recommend. Sticking to my budget is HARD, but is a great habit to cultivate; plus, it gets easier once you try budgeting a few times. 

3. There is a huge difference between what I could afford and how much I had (net worth). A number of times, I bought meals or things solely because I had the money sitting in my account or could easily pay my credit card off without considering I needed to save some of that money. It happens to the best of us, lol. I might have money to buy a new computer, but can I afford to buy a new computer? NOPE. Some of the questions I learnt to ask myself before big purchases were:

• Will this cause a huge dent on my savings? 
• Will I have to drastically adjust my basic needs to accommodate this expense? 
• Do I really need this?

These questions and the understanding that my net worth doesn’t exactly determine what I can afford have helped me spend money a lot better- especially when it comes to the big things. For example, I literally just walked away from a $200 coat I really like because in reality, I can’t afford it. (I probably wouldn’t let you know if I went back for it 😉)

4. Building up more on point 3, I recently learnt that money I am expecting (expected pay) does not count as money I currently have. Last spring, I knew I was going to receive more money than usual from working overtime, tax returns etc. I started spending the anticipated money (via credit card and savings) even before the money actually hit my account. In the end, I ended up using the money (when it arrived) to pay off my credit card and couldn’t fully replenish the savings I had spent. I believe in budgeting your expected income, however- I don’t think it is wise to spend money on luxuries in anticipation of future income. 

5. There is an opportunity cost for every dollar spent. I like to think of that $20 cab in terms of what I could get; like a fraction to a pair of sandals I have been eyeing, a tenth of the coat I want or 2 Bellini’s and 3 mini burgers at Cactus Club during happy hour in the summer (before taxes and tip). I’ve found thinking like this has not only helped me prioritize my wants and actively save for them but also helped me walk away from impulsive spending too.  

6. It’s always good to have someone hold you accountable to your financial goals. 

7. If you don’t plan how to spend your income, you will most likely end up broke or living from pay to pay. Back to last summer when I worked really long hours and was expecting a significant amount of money, I never planned what I wanted to do with the money and I have no idea where the money went (I actually do but, the point is I squandered all that money without carefully thinking about it). 

8. It is helpful to take time out to read about how other people achieve their financial goals, what steps they took, read articles, research papers, read books. With personal finance, one size doesn’t always fit all so, the more knowledge you gain, the better chances you have at finding out what works best for you. The main  

9. Idle Cash is bad. I learnt this in my finance course last semester, and it made me realise I made some rather ill-informed decisions. I had a foreign account (housing a greater fraction of my savings) earning barely no interest. I like the idea of holding US Dollars (it is a stronger and safer currency than the Canadian dollar but, the truth is that money is better sitting in a bank earning interest. This made me think of people who save money under their mattresses and in cupboards (my Nigerian folks know this). I think some of that money is better off in the bank- earning interest. Lesson: Be as liquid (i.e have easily accessible cash) as possible, but investments or even a high interest saving account is not a bad idea.  

10. Emergency funds are A MUST: I randomly got called sometime in November, months after I got my dental work done, informing me my insurance company rejected one of the claims and I had a bill in the hundreds in my name that was about 6 months past due. As mad as I was by the entire situation, I didn’t really feel the financial burden of this sudden bill because I had my emergency fund to fall back on. 

I’m learning from my previous financial mistakes and learning how to make better sound financial decisions. Also think at some point, I need to find a balance between living my best life and saving for the future- Can I get an Amen? I am struggling to find a balance between aggressively saving now and enjoying later or actually making sound financial decisions and enjoying life. If you have tips- please share. I think these lyrics best describe how I feel about finances the balance these days.

“I no want kpai, I no want die (I don’t want to die, I don’t want to die)
I no want kpeme, I want enjoy (I don’t want to die, I want to enjoy)
I want chop life, I want buy motor (I want to enjoy life and buy a car)
I want build house, I still want turn up” (I want to build a house, yet still turn up)

-Burna Boy (Ye)

That’s all I have to share so far. What are some lessons you have learnt in dealing with your finances? Please share with me. 

Talk Soon, 

Featured image- @tjolaku