MOONWALKING ON AN ESCALATOR
Tags: Growth Mindset, Lifestyle Inflation, Self Development, Self Improvement, Self Help

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‘’It’s not how much you make but rather what you do with it’’ that matters. It has been generally claimed that over the course of the average lifetime, more than enough cash slithers through our fingers but most of us still find a way to live from pay cheque to cheque. Stuck in the hamster wheel of earn, spend and repeat till we retire with nothing to our names wondering ‘’where did all the money go?’’. It’s the quality of our fiscal choices and not the quantity of the money we receive that determines poverty or financial freedom. With that being said I would say a lot of that has to do with our spending habits and savings culture, and we need to make the necessary adjustments in those departments.

How come we earn so much and yet remain moonwalking on the path to wealth? I attribute this partially to our adoption of a false sense of financial security especially when we receive a windfall or a bump in our wages. The term I’m ranting on about and attempting to articulate is known as LIFESTYLE INFLATION.

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It’s the self-imposed tax we all, to some extent suffer from — the notion of ‘’the more earnt, the more spent’’. This self-destructive way of thinking stifles the creation of wealth and keeps us stagnant as we increase our expenses in correspondence with a rise in our earnings. The reason why this is detrimental to our financial health may slightly drift us towards assets and liabilities or spending and investing.

The key to creating wealth is in the acquisition and management of assets i.e. things of value that can retain or grow their value over time (or appreciate) such as gold, real estate, oil, Treasury bills, businesses etc. Interests from investments are then reinvested and as interest accrues/compounds over time, a cycle is created till one can live solely off of the interest of her/his investments hence, wealth is created.

When we use most of our financial resources on liabilities, or expenses that do not appreciate in value such as jewellery, private cars and expensive clothes we limit our ability to save and invest. We are unable to capitalize on opportunities to create multiple sources of income and therefore put ourselves in a position to depend on our sole, primary and over utilised income stream; our pay cheque.

Talk about a sitting duck who built it’s own chair huh. Its fiscally suicidal and the most dangerous part of it all is the stealth. Lifestyle inflation hides in plain sight, so more often than not we are oblivious to the negative implications and impending danger resulting from our poor fiscal choices and actions that are gradually contributing to our potentially incoming financial demise. The false sense of security, built on the weak foundation of a regular but impermanent and often inadequate paycheque causes us to dismiss the blips on our radar and all signs of incoming danger till its too late.

Thus, we are usually caught unaware when ‘’stuff’’ hits the fan and all the cash seems like it was blown away. We therefore need to be very conscientious with all or at least, most of our financial decisions and actions with the main goal being to acquire assets. Let us all learn to be more intentional and prudent with our financial resources, especially when there’s excess or an increase so as to avoid the trap of a false sense of security that can impair out judgement.

As human beings, we have needs that constitute a part of our general well-being such as food, clothing, shelter etc so although they may be liabilities, they have quite a good ROI (return on investment) in/by making you a better person, especially when financed in moderation, mind you. So, although technically contradictory, invest in essential liabilities because they contribute to your personal growth and development.

We should learn to keep our lifestyles modest with the main aim being functionality (as discussed above); our fiscal resources should be used to economically finance expenses that make us productive and efficient human beings. The caveat is here is that this can include a wide array of things which can rack up quite a tab, so I entreat each and everyone of us to prioritize what is truly necessary.

The concept of Cash flow may also help shape our perspectives and thereby help us make better fiscal decisions. To my understanding, though quite crude, cash flow is the movement of money in and out of a particular location i.e. company, person, project etc.

With regards to cash flow, we all get/have some amount(s) of money during the course of our lives, but it is not so much as the movement of cash in and out, but rather the amassing and consolidation of financial resources which can then be used to acquire items/objects that appreciate in value (over time). That my friends, is the key to wealth creation.

Lifestyle inflation facilitates the movement of money out of your domain of jurisdiction and inhibits your ability to consolidate financial resources (i.e. save) in order to begin acquiring assets (i.e. investing).

With that being said we need to learn to better decision-makers especially in terms of fiscal matters and that involves extremely difficult but possible disciple of saying no a lot. We also need to be proactive in identifying and capitalizing on opportunities to invest our hard-earned and saved funds. Of course every investment has to be done only after due diligence and review of competent counsel or risk the pain of starting from square one all over again.