Stay In Your Lane

I heard the most intriguing story this weekend that made me question the impact social media has on our finances.

Sade: I need a favor. Please can I borrow N200, 000? I’ll pay you back with interest in 2 months.
Tolu: What do you need the money for?
Sade: Remember the Celine bag (N484, 000) I bought in February? I borrowed some of the money from Ngozi. Now she’s hounding me everyday. I need the money to pay her back.
Tolu: Why did you buy the bag if you can’t afford it?
Sade: Abeg don’t insult me o! Who told you I can’t afford it? I saw Lara’s blue one on Instagram in December. We are the same age, we are both working. So what makes you think she can afford it and I can’t?
Tolu: Look at you! Be following Lara! Don’t you know she’s an ‘Aristo’ girl.

Something is wrong with this picture, no?

I am a self-confessed Instagram addict! It gets me through many boring activities, but unfortunately, it has become the source of emotional and financial distress for a lot of people.

Instagram is only a collection of snap shots that make up a small part of people’s lives. So don’t let someone’s Instagram reel confuse your financial reality; create your own financial lane and stay there. There’s no shame in living on your own terms and saying, I can’t afford this right now. Instead of speculating on how other people are making their money, focus on building your own assets to the point that you can sustainably afford the things you want.

Here are 3 tips to help you get started.

Treat Your Life Like It’s a Balance Sheet
Sade and Tolu monthly salary: N300,000 p/m each

BALANCE SHEET Sade Tolu
ASSETS  
Land/property 0 5,000,000
Stock portfolio 0 2,000,000
Cash in bank 200,000 500,000
TOTAL ASSETS 200,000 7,500,000
LIABILITIES  
Rent 1,000,000
Payment plan for electronics 50,000 300,000
School fees 300,000
Loans 400,000 400,000
TOTAL LIABILITIES 450,000 2,000,000
NET WORTH -250,000 5,500,000

For example Tolu and Sade earn the same monthly salary but Tolu has clearly made better financial decisions over the years. It is obvious that she has invested and saved towards growing her assets, which means that even though she has 4x Sade’s liabilities, her net worth is over 2x Sade’s.A common mistake many people make is to measure their financial success based on their salary instead of their net worth, which gives them a false sense of financial security.

It is important to clarify that although liabilities and expenses are both costs they are slightly different. Liabilities are obligations you have already committed to and MUST pay while expenses are a choice. i.e. Tolu has to pay her rent while Sade chose to borrow to buy a Celine bag. Note, that not all debt is bad debt. If she were incurring debt that is proportionate to her income to buy an asset that provides a passive income that would demonstrate some financial intelligence.

Unfortunately, like Sade many people with decent incomes end up with equally large expenses that do not allow them to save and grow their assets.

Establish your net worth and determine what needs to be done to increase its value: Define and set a goal to increase it by i.e 15% p.a.

Build Multiple Streams of Income
Increase your assets by finding creative ways to augment your income, find a ‘side hustle’. This could be anything from becoming a House of Tara representative, selling Forever Living products or investing 15% of your income in building an investment portfolio of stocks and fixed income products that will give a good return as well appreciate in value over time.

We are always looking for quick fixes, everybody wants to hit the big time but very few people want to work for it. There is absolutely nothing wrong with wanting to ‘blow’, but while you are waiting find avenues to create sustainable and consistent passive income, no matter how small because over time it makes a difference. In the words of Lil Wayne, ‘ slow money is better than no money’.

So while you are speculating on how many Aristos Ngozi has, Solape is making an extra N300,000 aside from her salary selling forever-living products and Soji is collecting dividends and bonuses from his stock portfolio.

Get Your Priorities Right
Some people are more intent on looking like money than actually having it. All fingers are not equal so decide what expenses are most important. For example, If you write down everything you spend your money on for the next 3 months, will you find that you’ve bought Aso Ebi 6 times @ 25,000 each in 3 months?

Breaking news! That’s N150, 000 that could have been spent buying Dangote Cement shares, on Aso Ebi that you will most likely never wear again. If your income can support this expenditure and you are investing at least 3x what you are spending, go for it!

(NB if you bought N150, 000 worth of Dangote Cement stock in October 2013 by April 2014, with capital appreciation + N 7 dividend you would have gained approximately N44, 330 on your investment) *although stock could also depreciate, in comparison to Aso Ebi, this is still a better investment*

However, if you have to borrow and beg to pay for Aso Ebi over the next 3 months clearly financial freedom is not in your immediate future. It’s important to support your friends but if you can’t afford it, you can’t afford it. Learn to say No. Be unique; wear your OBSIDIAN or F’N’R oleku that you can ‘re-rock’ in a few months. There’s no shame in your game.

There are always going to be people who have more or less than you. This is not your concern. Everybody’s path in the journey to success is different. The people who have the most sustainable financial success are those who are sufficiently focused on improving and building their own lives that they don’t have the time or energy to keep up with the Lagbajas or make negative comments about how other people made their money.

signa1

12 thoughts on “Stay In Your Lane

  1. I’m so glad I found this website, this is exactly what I need. So dangote cement shares are that profitable ?

  2. Great article! Can you do a post on investing in for people with an average income e.g NYSC Corpers. I’m very interested in investing but it’s a little overwhelming to know what and what to invest in. I need a low risk fund that I can invest in. Anyone you recommend? Thanks so much!

  3. Am so glad I found this website!looking forward to more posts from you.And I do hope you consider Lola’s Question too.Am a Student and I need all the advice I can get on how to plan a better Future.Thanks

  4. Now if this isn’t the truth, what is?!
    We really should always map out our lane and stay on it! I say to my friends, “I could have the money yea, but I can’t afford to spend it this way”.
    I have a good saving habit, but NEED to improve on investment.
    Even when my own sister o, lol, tries to make me spend unnecessarily by showing me she’s spent on same item (which could be necessary for her), I sing wizkid’s line to her “my money and your money no be mate!”

  5. “Treat your life like a balance sheet,” now that’s profound. Staying in your lane is essential for personal happiness. You’re an individual; different personality, different motivation, different pursuits. Hold up your individuality. Never try to imitate. Imitation always causes problems. I enjoyed the article.

  6. The conversation in this article is a typical example of the reality we find ourselves in when we decide to live above our means! So apt! Thanks Arese for starting the conversation on personal finances, you rock!

Leave a Reply