When addressed, the tendency to bounce back and exceed your initial mark is very high. This has been exemplified by renowned entrepreneurs like Aliko Dangote and Femi Otedola. In 2008, Otedola lost $1.2 billion to bad business investments.
He said, “I had two options, either to commit suicide or to weather the storm. I decided to weather the storm. I just knew it was a phase I had to go through.
Experience is the best teacher. I didn’t have a proper structure and blamed the banks for not advising me. All they were interested in was the profits. They were not interested in the sustainability of the business, they were short-sighted, and all they were interested in was throwing money at me. So they never advised me.”
Though the experience of going from billions to zero was hard, he bounced back after identifying his mistakes and correcting them. In 2014, he bounced back and became one of Nigeria’s billionaires. His experience means your current broken stage is reversible. To do that, do the following things.
Identify the cause of your current state
The first step to getting away from your broke state is identifying where you went wrong. These can be due to different factors, such as bad spending habits, poor saving culture, and taking a bad risk. Identifying them will help you stop and control some of the agents responsible for your being broke.
You will always be broke if you do not control your urge to spend unnecessarily. This is because you will be unable to save and invest your money, which are the ways to build wealth and not go broke. Warren Buffet said, “If you buy things you do not need, soon you will have to sell things you need.”
Due to its importance, Tony Elumelu advises everyone to develop a saving culture early in life. This way, a saving mindset is formed.
If you have nothing else in your life, the one thing that is very important for you to have is a skill. Just as you need air to breathe, you need to have skills. This is the only constant variable that can change your broke state to having millions in your account. Part of the truth is that people don’t have money problems, just skill problems. So learn a high-demand skill and get people to pay you for it.
Johann Rupert, a South African billionaire, said, “As you start out in life, it is important that you know at least something about everything, but as you get older, it is important that you know everything about something.”
Budget and save
Budgeting your money helps you put your spending into perspective. This way, you are responsible for every penny that goes out of your wallet. Also, you develop a monetary value that becomes a part of you and helps shield you from being broke. It explains why Barack Obama, former president of the United States, said, “A budget is more than just a series of numbers on a page; it is an embodiment of our values.”
To make it easier, Elizabeth Warren, in her book All Your Worth: The Ultimate Lifetime Money Plan proposed a ’50/20/30 budget rule. That is, 50% of your net income should go toward “needs”, 30% should go toward “wants”, and the remaining 20% should go into savings.
Your ‘needs’ include things like groceries, prescription medications, and rent. Your ‘wants’ include Netflix subscriptions and manicures. Savings is the most important of the three. Hence, set it aside first before the others. If you have exhausted the budget for that month, develop the habit of not compromising your savings. Instead, wait till the next month. Warren Buffet said, “Do not save what is left after spending, but spend what is left after saving.”
Increase your income and save
While having a job might keep you from not being hungry, it cannot keep you from getting broke. The fact is that your broke state is connected to your income stream. So, if you are not earning enough, look for ways to make more.
If not, you will always be broke. With more cash flow and less outflow, you will never be broke. Warren Buffet thus advises that “Never depend on a single income. Make investments to create a second source.”
Investing is one of the best ways to create wealth and never be broke. This is one of the secrets of wealthy people. They have passive and active investment portfolios that earn them income even while asleep.
So, if you are currently broke, follow this advice by the chief executive officer (CEO) of Berkshire Hathaway, Warren Buffet. He said, “If you don’t find a way to make money while you sleep, you will work until you die.