Michael Jackson, the king of Pop who reportedly signed a recording contract worth almost $1 billion and sold more than 750 million records.
He was amazing at making money, if you are like most people you think with this amount of money, you can live for good rich, there is no way to have any financial problem. Unfortunately, this was not the case with Michael.
Can you imagine that he was forced to the brink of bankruptcy in 2007 when he was unable to pay back a $25million loan?
He was spending money like he would never run out until he finally did.
At his death at 2009 he reportedly owed more than $300million.
Another example,
The former heavyweight champ Mike Tyson, who made more money in his time than any other boxer in history nearly half billion dollars, he was spending like there is no tomorrow, buying like crazy, wild life style, led to his bankruptcy.
In an interview in 2010, he said: “I am totally broke, it is just happened.”
Do you think any of these two examples imagined a day when the money would stop flowing? do you think they even considered preparing for such a day?
Furthermore, do you know what percentage of lottery winners waste all of their earnings within few years? About 70%.
What do these people lack?
They have no clue on how to manage money.
People without money management skills often make poor financial decisions, regardless of how much money they have.
No matter how much you earn, if you don’t know how budget, save smartly, spend wisely and how to grow your money, you will lose it all.
Here are few tips that can help you improve your money management skills:
1.Get organized
Know your basic expenses “fixed expenses”, and “variables expenses”. Write everything you spend money on over month or two months and at the end, instead of categorize them, you do one simple test, take out highlighter, highlight everything you spend money on didn’t not bring you joy, you will find there number of thing you spend money.
So instead of thinking of budget as deprivation you can switch your mind towards joy optimization, because you are spending your life energy you want to squeeze as much joy out of it.
2.Get clear
Know where you are currently standing financially and where want to be, most people do not know.
Have specific measurable goals and achievement date.
“If you don’t know where you are going you will end up nowhere.”
When you are truly on purpose, people, resources, opportunities, gravitate towards you.
3.Get consistent
Don’t just put numbers on paper, identify actions you can do every day.
Replace old habits by new ones. Stick to the process even if you mess up.
Tony Robins said: “it is not what you do once that shape our lives, but what we do consistently.”
4.Get positive
Disassociate your happiness with spending money on immediate pleasures.
Differentiate between needs and wants.
A true need is something you must have for survival such as: food, electricity, gaz, water, clothes, shelter.
A want is something that is not essential to survival, but you would like to have such as: designer clothing, cosmetics, and brand shoes and bags.
Although it is trivial but mapping a concrete example of each will help you navigate through your emotions when making purchasing decisions.
The confusion can arise when we are not sure if something is a need or want.
“Too many people spend money they haven’t earned, to buy things they don’t want, to impress people they don’t like.” Will Smith
Next time if you want to buy something, ask yourself:
If it is not a clear YES then it is a clear NO.
The statement is powerful to save time and money, you might want to use it any time you have options to purchase.
Let me remind you that it is not bad to have wants or to spend money on wants.
Yet, you cannot prioritize your wants if you are classifying your wants as needs.
Always remember,
Money is not about being rich, it is about enriching your life
Financial education is lifelong process. You do not have to be genius to take part in this process, you have to be ready, take action and be able to learn.