Only broke people spend money to look successful

One of the reasons why a lot of people in Africa are poor is not because they are not making money.

The reason is because they don’t really understand the function of money.

Money has two essential functions, which is building and signaling.

So it is either you are building stuffs or you are signaling and by signaling I simply mean, showing off or trying to impress others.

Whilst those who have money see it as a tool to build and gain more, those who don’t have, see it as an instrument to show that they have arrived.

Research has found that when people feel uncertain about where they are socially, they are more likely to buy luxury items to look successful, like clothes, watches cars.

It is not really because they need those things but because they want to signal to people that they have become successful.

However, what they don’t know is that the number one secret of growing wealth is to live below ones means and continue to invest in what one would reap few years later.

A wise saying has it, “pretend as if you cannot afford a loaf of bread until they realize that you are the owner of the bakery.

In order to build a strong financial foundation, you have to adopt the following steps:

1. Quit life style inflation: There are people who as their income is growing, there life style is also growing. Life style inflation is the fastest route to poverty because, such attitude does not create room for saving and when misfortune knocks at their door, they would have nothing to lean on.

In Nigeria, we have seen celebrities begging for money when they have serious health challenges.

Most of the time, the reason for that is because they are victims of life style inflation.

To guard against this, always try to be yourself. Don’t be in the habit of impressing people because those who celebrate your success today will disown your failure tomorrow. You should know that a wrist watch of one million naira and another one of hundred thousand naira does the same thing. They tell time. The one of one million does not tell more time. Again a wedding ring of one million naira and a wedding ring of one hundred thousand naira signify one thing-One is married. So when we adopt the philosophy of living simple, rather than trying to impress people, the happier our lives would be.

2. Strict Budgeting: Apart from living below your income, you have to also be tracking your income and expenses. This helps you to manage your finances effectively.

The truth is that a lot of people don’t know what is coming in and how it is coming in. They also don’t know what is going out and how it is going on.

You have to be very strict on your budget.

3. Apply the principle of saving and save regularly: One of the surest ways of growing wealth is saving and then investing. But a lot of people find it difficult to save.

The best principle for saving is 50-30-20.

50% of your income for your needs, that is those things you cannot do without in the home.

30% for your wants. These are some of the things you can do without like eating out, going to watch cinema or other fun activities.

20% of your income for savings.

The way it works is while the first must not be touched, you can be playing with second. Instance, any time number is not enough, part of number two can be used to augment and whenever, number two is not exhausted, whatever that remains can be send to number three.

4. Invest wisely: You cannot become rich if you fail to invest. But you have to first of all understand investment so that you can invest wisely.

5. Avoid going into unnecessary debts: Marketers are no doubt developing different irresistible strategies to sell their goods and services like buy now and pay later. Try as much as possible to resist such offers. In fact, buy only when you have money.

6. Avoid impulse purchases: With the internet, marketers are now everywhere, including our bedrooms by way of the social media handles and a lot of people are making impulse purchases, buying things that are not of priority to them.

There was a case of a woman who used her children’s school fees to buy a set of kitchen equipment that she saw online.

So try as much as possible to be avoiding impulse purchases.

7. Make informed spending decisions: Whenever, you want to spend money, value should be your utmost concern. A lot of people spend money and later begin to regret why they did that. So, before you make a big purchase, sit back and ask yourself the value that you are going to get from the purchase. If you are not convinced enough, don’t buy.

8. Educate yourself: Money is like a school so, there is the need for continuous learning about personal finance and investing. You cannot achieve much in life when you lack financial intelligence. So, you have to make sure that on a daily basis, you are studying money and the best way of compounding or growing it. The more you study, the better you become and the better decisions you would making with it.

9. Diversify investments: There is a saying that having only one source of income is the easiest route to poverty. So, if you want to build a strong financial foundation, you must not have only one source of business. Spread your resources across different businesses.

10-Seek professional advice-Nobody is an island. Whenever, things are not working out financially, endavour to ask for help. Consult financial experts for direction.

•Peter Anosike has a Ph.D in Consulting and Profit Management. He is an international bestselling author and founder, Ultimate Entrepreneurs Academy, an organisation that trains college students, under graduates and even workers on how to become successful entrepreneurs. Google Anosike Peter for some of his bestselling books.