I was broke for the past one month. My mentor years back shared a secret; one tiny leakage can sink a ship. I guess I learned the hard way.
It started off as something simple. Someone asks you for a loan, you give them that loan, they don’t pay back on time and you are forced to take money from one of those accounts you are not meant to touch.
One of my case studies in life is Charlie Munger, he’s Warren Buffet’s business partner. He speaks of how we always ignore second order effects.
In other-words, effects of effects of effects. He means, that effects also have effects which have effects. That sometimes you do one thing, that will screw up your entire life. You make a girl pregnant before you are ready to manage a kid, because of that, the girl fails to complete her studies. Since she’s failed to complete her studies, she finds it hard to get a job. Because she can’t get a job, she probably becomes a prostitute. Because she’s a prostitute, she doesn’t give the child enough care. Because the child is raised without care, he grows up to become a criminal. Because he’s a criminal, he goes ahead to murder an important doctor. That important doctor would probably have saved 1000 lives.
But how did it all start? With a man who impregnated a lady before he was ready. You can see second-order, fourth order till tenth order effects from one effect.
So that basically happened to me. I lost a grandfather. Because I lost a grand-father, I was forced to withdraw money from an account that’s basically a long-term account of mine. Because of that simple mistake, I ended up broke. Yes, I am trying to have a turn-around.
And because I have been broke, I delayed most payments. Today I had to call all my debtors to postpone payment. Probably, they will also call their debtors and postpone payment. It all started with a grand-father who died unexpectedly.
So, what if you find yourself in the same situation, how do you make that magical financial turnaround?
I think you’ve got to accept where you are in life. You’ll never solve your problem while in a state of denial. I accept I am currently broke. Now, definitions of broke defer from person to person.
Here’s how my mentor told me to define BROKE. He said and I quote; “Ian if the money you have on your current account can’t last you 6 months upfront without you having to work any day of those 6 months, then you are broke.”
He basically means that you are not broke if you can survive for 6 months at the same standard of living without having to go to work. So I was broke, I was less of 6 months. Basically, if I lost every job and every business, I wouldn’t survive for 6 months. So I defined myself as broke. And I accepted that.
Again, you accept that you are not going to magically transform your financial situation from scarcity to abundance overnight. It took you weeks to get to that situation, what makes you think it will take you hours to get out of it?
You also have to accept and acknowledge how you honestly feel about your financial situation. I was feeling crapped up. I have only been able to try and resurrect today. My mentor always tells me, if you find yourself in a hole, the first step is to stop digging. I had to stop digging. I stopped giving out loans. I cut down my airtime bills. I stopped the leakages first.
You must set some goals and intentions on how you’d like to improve your financial situation. Focus on WHAT and WHY. I guess the WHY is more important here. If you have a strong enough WHY for any goal you set, you can achieve it. It hurt me that cousins would call me with problems and I couldn’t help.
But you also have to be realistic at this point. You can’t set a goal where you go from total scarcity to total abundance in a blink. Set something that’s not too hard for you to believe. As your financial situation improves, you can always set new incremental goals.
I call it the incubation stage. After setting a goal, I give myself a couple of days for its incubation. Usually, I will begin to get ideas for how to make the goals work. I will also attract some helpful synchronicities to speed me along my path. Then, what I did next was to develop a plan of action.
Once I came up with a reasonable plan, I committed to it. This really requires self-discipline and a burning desire. There are many ways I build my self-discipline. For example, making it a must to shower super cold water every morning regardless of the weather. Or making it a must to be 15 minutes earlier for any appointment.
This is probably the most important step. You have to work the plan you’ve established and never give up. I had to fore go some parties, some movies, I cut down the rate at which I was eating out. I was doing this in order to restore my 6 months income security.
I am not yet there, probably short by a few days. That means I can survive very comfortably for 6 months without ever having any new income during those months. Just sitting and spending the money.
About the 6 months, this is how to come up with your 6 months amount:::
Determine how much you spend daily on food, rent, transport, toiletries and every basic essential. Multiply that by 30 days then by 6 months and you will get the minimum amount that you should always have to achieve some level of financial stability. Short of that amount, consider yourself broke.
My goal this year is to push to 12 months. Where I am able to survive for 6 months without working at all and still be able to maintain the same standard of living, pay for my internet bills, have delicious food and sponsor friends to a few beers.
I do this, because life is unpredictable. You may wake up without a job. If you have a business, that business can wind up in a few hours. It’s a very uncertain world, and the only way to manage an uncertain world is to mould yourself into someone who’s made better by uncertainties, something my favourite author, Nassim K Taleb calls Anti-Fragility. You become anti-fragile to the randomness of life.
Goodness, the things you learn from going broke!!!
The writer is a self help/motivation expert