We recently moved house with the family, and it was quite fun. At our new house, I spotted a nice space to do some gardening, and had an interesting experience.
First I had to prepare the ground and clean it up a little. From a quick glance, I thought I could simply dig from the top, remove the weeds and start planting. Let’s just say I was quite naive in my thinking.
I found all sorts of things buried below the top ground: From broken bottles and tiles to pieces of plastic and just about everything you’ll find in a random dump. There was no way I was able to plant anything there. But I worked on it and now it’s almost ready to receive seeds.
Just like the pieces of glass and plastic, most of the habits that make up our financial lives come about unconsciously – we have no idea how they got there. We spend money in similar ways. So before we can prosper financially and grow our money, we need to tend to our personal finance garden. Dig up the soil and look at what you’re spending your money on.
That means pulling your bank statement and scrutinising your current spending habits. This is especially important if there’s a problem. You can’t solve a problem you don’t know. Find out what your current unconscious spending habits are before you work on a budget. And don’t guess. Tools like 22seven are great for categorising your spending.
The ultimate goal is to spend less than you earn. If that’s not possible, then your first goal is to keep what you earn and spend, equal. Don’t take up more debt if you’re in debt. You’re just making the hole you’re trying to escape deeper. When your debt is paid off you will be living below your means. Now your soil is prepared, and you can save or invest the money that previously went towards servicing your debt.
That said, this doesn’t mean you should wait until all your debt is paid off before you invest. Long term debt is part of your living expenses – so you can continue with those repayments at the same time as investing. Try to meet these payments with some money left over to invest, tending to your garden section by section.
Attending to your finances by cleaning up your debt and some bad spending habits is analogous to preparing the soil before planting seeds for a garden.
Some gardens are healthier than others. That’s why it’s important to first determine the condition of your garden before rushing out to buy some seeds.
Now that I’ve cleaned the soil I can plant my tomatoes and enjoy its dividends over the coming years.
Cash Club blog
Njabulo Nsibande is a Just One Lap user-turned-contributor and a founding member of an investment club. His “Cash Club” blog details his experiences balancing the financial obligations of a young parent with his investment aspirations.
Follow Njabulo’s journey here every month. You can also follow his trading journey by listening to his Village Trader podcast.
Find him on Twitter: @njabulo_goje.