The Importance Of Having A Contingency Money Plan
In Nigeria, People tend to blame things like recession or inflation for the dent in their income and savings when they do not even pay attention to their marginal propensity to save or consume.
This means that when people have money things appear cheap to them and when they do not, it appears very expensive to them, not knowing or understanding that it's their financial situation that's changed for the better or worse.
You see when one's financial position changes it creates an illusion of lack of affordability when all they needed was discipline.
When people have money, they fail to check on their expenditures, they don't deem it necessary to check on their expenditures, forgetting that one must constantly earn above their expenditures to keep living the way they want.
However, how many people earn the same amount of money or more till they grow old? Nobody.
This is why people realize how wasteful they've been immediately they can no longer earn the way they do but their expenditures are still constant despite a negative change in their financial situation. A lot of people do not have a lifestyle
Stability Amidst Financial Chaos
They do not have financial goals, their financial situation determines their goals, this is why some others find it difficult to maintain a level of stability in their finances even when their income takes a dip.
This means that we must normalize the act of planning and a way of life despite our financial position because money in itself gives the quality of purchasing power, it's us who gives it value.
This isn't to say people shouldn't increase or reduce their quality of living when there's money or when there's no money, what I'm saying is that finding a middle ground will make it easier for people to maintain their quality of life when there's a constant check to their excesses.
There's a feeling of endlessness that comes with abundance, when we allow it to control us, it becomes normal for us to be broke with just a sudden shift in our income.
Reality: The Impact & Preparedness
"When spending money, we have to understand that the impact of reality on our expenditures is bigger than our sense of preparedness or perfection and this checks our sense of optimism and minimizes it to a certain extent.*
In other words, many people do not have contingency plans especially when they feel that their initial plans are just too good to fail. For example, a person who sells everything they have just to afford a visa to another country is placing perfection in their plans.
Let's consider the fact that this person might become established, make money, and don't even need to go back to their country, so if this is possible why isn't it also possible for them to be deported?
One of the reasons why people go from being poor to being rich in a short period is because they feel their initial plans are too good to fail.
Building "MONEY" Shock Absorbers
Many people are no longer rich like they used to be. Maybe due to an inevitable change in their cash flow. Nevertheless, the reason they're not back to ground zero is because of the contingency plans they've put in place when things were smooth.
Because of life's unpredictability, we have to put contingency plans in place especially because we cannot control our blind sides, we cannot see the future, and we cannot correctly predict tomorrow by looking at today.
People are volatile, since we don't see it, it's obvious in our investment choices and the way we react to changes in our financial status.
One of the things that prevent us from being caught unawares, is opening ourselves up for accountability, building up a lifestyle that's hardly influenced by a huge change in our income, and have multiple contingency plans.
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You are right bro, just because we can't see the future, sometimes when you have something with you, you don't know the values because you believe they way it comes is the way it will keep coming but money is not like that all the time...
Yeah, this is an assertion you're right about.
People are volatile, since we don't see it, it's obvious in our investment choices and the way we react to changes in our financial status.
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That's is why some can't cope with been broke because they don not plan well for the farming period
I was actually things about the selling all one has for migrating to another country few minutes ago, and the thought was I have such opportunity but I just don't see liquidating my cryptos for such move.
It takes a lot to be financially discipline, spending wisely while also maintaining consistent growth. This is something none is perfect at but with consistency and discipline we can only get better.
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I know of people who would do such. Liquidate everything they have in a bid to probably secure a life in another country. I think the uncertainty to this plan is something that one might regret. While there's a possibility one might not. I don't think I'll take those chances.
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Liquidating all that one has can never be a good idea.
Having an emergency fund is a great measure to prevent falling to zero
That zero ground after one have been making good progress should avoided at all cost.
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Exactly my point..
To go back to Zero is not an option
But the promise of a better life is always lurking so many people do not mind taking that risk at all cost.
That risk at all cost gets some doing things not worth doing for the sake of money, it's one bad decision leading to another...
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Hahaha, I remembered someone who put their pension into ponzi schemes back in the days. It's crazy. All that risk just for an chance to get more money
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Usually, people is lack of knowledge when it comes to finance. Lack of financial literacy. That is why people are becoming poor.
We really need to know how to make a budget plan. Know where the money comes in or out.
Have some !PIZZA
You're right, everything you've mentioned is being conscious and disciplined to an extent
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See ehn... This post hit the nail on the head.
A lot of people don't have an emergency fund.
People just go on and on without thinking of a downfall..
This post just brought to mind one doctor who died after failing an exam to relocate to the UK.
He spent all he had on the exam and after failing, he committed suicide.
Once you don't have an option to fall to, when you fall down and hit the ground, it can be very disastrous
I pity the deceased doctor. Going abroad isn't easy. Sure it's promising and exciting. But I'll never sell everything I own you do something as him. How will I begin again? What do I fall back on? Many people underestimate the struggles or the near struggles of starting from ground zero.
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I know right.. I can't start again..
Definitely cannot, where is even the honour in that?
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Being prepared is always a good thing and I suggest people build an emergency fund. By doing so, at least you won't be in a rush to sell off assets to pay off anything that may come up.
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Well, selling of assets to take care of an emergency is absolutely crazy and this is because we cannot ascertain how much we'd need to sell off just to get it done. It's pretty crazy.
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We must alway prepare for what is coming because things change and that's why it is important to invest. Change is constant
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To invest, we'd need money. Most of what makes it difficult to invest is not having proper direction for money. Thanks for coming through.
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I was just nodding the moment I started reading this article until the very end @josediccus. Why did I just find out that such an awesome and inspiring Personal Finance guru is here on Hive? I must've missed a lot. But not gonna miss any future posts of yours.
This and the other way around hit the core of managing one's personal finances. For me, it doesn't matter how big or small your income may be, if you don't have the skill, knowledge and discipline or should I say the combination of the three, you'll always find yourself in the bottom of the pit wondering want went wrong along the way. I'm in agreement with finding the middle ground. When I started working, I was paid less than half of what I'm earning now but it didn't stop me from managing my finances well. The same skill set was useful when I had more money to spend but mostly to save and invest.
This has been a refreshing read, not exaggerating anything! And my eyes are sparkling in excitement to read more. I'm also thinking of reviving my Financial Fridays which I started last year. You inspired me. 😊
@patsitivity, thanks a million. Your username sounds like positivity" hahaha. Well thanks for finding my content good enough. In reality, it's difficult to find balance. Life itself brings out the best and worst in people and this is why money isn't relevant, our financial discipline is what's relevant.
I can relate with when you started working. It was the same for me as well. Sometimes being paid poorly makes us creative with spending and this is why every financial situation we find ourselves is a lesson we mustn't ignore.
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You got it right, @josediccus! My username was derived from my name and positivity. 😅
This is on point! Now, I'm a fan! Hoping I could learn more from you through your articles. 😁
Wow, what's your name?
Thank you, I'm glad you found this one really good, I'll check up your travel posts, before now someone used to reblog them so I frequently saw it on my feed.
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It's Pat short for Patricia. 😁
Oh no! Really? I love sharing my travel stories here in Hive. But would love to explore LeoFinance soon! You just reminded I'm itching to share some of my take on Personal Finance.
Have a blast this weekend @josediccus! 😊
You're welcome, give it a go, I'm sure you'll be surprised. I know your main content is travel and you're great at it.
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Certainly when you have money everything looks cheap and when you don't have it is the opposite what is certain is that you have to organize yourself to avoid those moments but for me the economy of a country influences a lot for example in my country Venezuela the costs grow daily to maintain the balance costs a little since the prices vary twice a day but your publication leads to the awareness blessings
Exactly, one must understand the psychology of money because a little money lesson can save one from implosion or have a negative effect. Sometimes our ability to manage is the value of the money we own as money in itself doesn't hold value beyond purchasing power. We give it the value it's got.
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Not having contingency money or saving money for the rainy days is the major reason a lot of people go to borrow and pay heavy interest . Most money hardships wouldn't be if people earn money, spend money, invest money reinvest money. This article has a simple but a must acknowledged fact when it comes to financial discipline. Thank you for being impactful.
No in Nigeria those people been exploited and ripped off for a long time by their governments and other countries. The Nigerians deserve it until they join projects like Bitcoin MYK that offer basic income only then do they have a chance of being free. No this is political it's no pull yourself up by your bootstraps like d'abo. You Nigerians going to live or die based on if you join cross border projects to fight all governments with bad policies and corruption and if you don't join you will suffer as a result of it.. I'm ready to lead the Nigerians to freedom.. i'm a better man than those you all serve.
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If one wishes to maintain their level of financial comfort, contingency plans are no longer an option, but rather a necessity.It is those that consider making plans for uncertainties that are shaken by a little wind and fall to the ground.
I am very much of a person that never really plans for contingencies, but now I am learning to do so as bigger blows have come my way. And there really isn't much that can make one frustrated when things do not go as planned and one is helpless to hold up the situation.
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Brother, you are damn right! When one is having a high cash flow, he may feel at the top of the world and then increase his expenditure without having a balance to it. So if there is a shift in his cash inflow, he would feel the real effect and then have the mindset of being broke. When all he had needed to do was to manage his income to prepare for the future.
It's true, it's important for us to be conscious and aware of our expenditures because whenever a shift in our cash flow happens, it's important to notice and adjust properly so that we can maintain a balance. Being broke isn't easy and that's why we should try to prevent it.