If there is anything that impedes your quest for financial freedom, it is expenses. Expenses, the amount you pay in exchange for your needs and wants.

Spending money is good no doubt, if not for anything, it makes you feel good about yourself.

Like when you purchase the new iPhone, you are not only thrilled because of the slick device but all of a sudden, you belong. Your friends immediately begin to rate you highly because you own an iPhone. You would pretend to make calls in public places just to show off your new iPhone (trust Nigerians na).

All these makes you feel good about yourself.

The Bad Thing About Excessive Spending

Too many expenses are like a leaking tank.

Imagine a situation where you have a tank in your backyard or on the roof of your building to store water so to have enough supply for you and your family. But the tank leaks.

You try every day to fill it with water but the next day, it’s all gone. You have to start all over again.

Too many expenses are just like that. Every day, you go to work and each day you earn money and hope that you will be able to have enough so you won’t need to work any longer.

But your expenses will make sure it doesn’t happen.

The more you work, earn and save, your expenses will keep eating it up thereby condemning you to start all over again.

Your leaking tank does not only frustrate your efforts to store water, it also messes your surroundings up. It soils your compound. It makes sure that your compound doesn’t dry, making it hard for people to move around comfortably in your compound.

The same way, excessive spending messes up your home. You can’t stand the look of your own home because of too many items littered all over the place. The unused shoes, clothes, mountains of toys, the most mundane item that never had any value for you.

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How much is okay to spend

It is true that it is only through spending that you can buy those things which money can buy. But the problem is in this…

How much is okay to spend? Can’t you just earn money and spend the hell out of it?

Like I said, spending money is good, but you must limit how much you spend.

You have heard the saying… ‘do not live above your means’. Or ‘live below your means’. Sure you have. But few people keep to this important rule.

We are passing through a period of severe economic hardship at the moment. Both the rich and the poor are complaining about how bad things are at the moment in the country.

But had everyone kept to this simple rule… live below your mean, this situation will not be as bad as it is now. But most didn’t. Even our government didn’t. We witnessed an incredible 16 years of economic growth, yet within 6 months of negative growth, most people including the government are scampering around, looking for where to find money to finance their needs.

Take a look at the graph above. As this person’s income rises, his expenses rise with it, given him no room to save and invest. I have never known of anyone who became financially free with this formula. In fact, it’s a financial disaster.

The graph below illustrates financial discipline. From the onset, this person made sure that his expenses are below his income. And as his income rises, though his expenses rise with it, but the pace is far slower, making more funds available to save and invest.

You must learn to adjust your spending so you won’t spend all your earnings.

No matter how small you earn, this rule still applies to you. You may ask, how can someone survive with a salary of thirty thousand naira and below and still not expected to spend it all?

My answer, you adjust and adjust and adjust until you are comfortable living with it. No, not comfortable… you adjust until you have learned to live with it. No one can be comfortable with a salary like that. But it’s the sacrifice that you have to make.

Your Needs and Your Wants

Why do you fall into this trap of excessive spending?

My number one reason is this… you have not really been able to differentiate between what we need and what you want.

You need water, but you want a coca cola. You need a car (for people that really need a car), you want a Ferrari.

Your ability to differentiate between what you want and what you need in the short and medium term can make the difference in the long term.

And this entails lots of sacrifices.

I know you want to enjoy life, but spending only on the things you need will not guarantee that. For example, you can choose to drink only water, after all, that is really what you need to quench your thirst, instead of Coca-Cola, laCasera, Pepsi, Viju milk and all those other drinks out there. You can choose to own a battered car, that’s of course what you need to get around, instead of a Porsche or Mercedes.

But the thing is the sacrifice of not spending on your wants now, the sacrifice of not enjoying those things now is surely hastening your quest for financial freedom.

It is in spending on those things you need now that will enable you to create the wealth that will finance what you need in the future. You can own a battered car today, but be assured that in the future, you can afford a luxury car. But own a luxury car today, you might not even be able to afford a battered car tomorrow.

You must learn to sacrifice for your financial future.

It’s not easy but it’s very necessary if you must be financially free. Wealth can only grow by saving and investing in the difference between what you earn and what you spend.

If you spend all our earnings or in the worst case borrow to continue living a lavish life, you will not really be able to create wealth and that will hamper your quality of life.

How to control expenses

Learn to spend on only the things you need.

Before you spend, ask yourself, do I really need this? Or it is an item that will find itself within a week or two inside the big Ghana-must-go bag in your packing store labeled in your head… unused items.

Employ every means that will enable you to spend less and less to make more funds available for investment. It might be one of your greatest wealth building strategies.