Mindset to financial prudence

15 days ago

We are in the Gen Z generation where even a young boy fifteen years old wants to become a millionaire overnight. The mentality of everyone has changed concerning financial management. People no longer believe in good management for the sustainability of their finances. Working hard to accumulate wealth is totally different from managing such wealth after the accumulation. Some people are richly knowledgeable at multiplying their earnings but they aren't a good manager.

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Responsible management, investing wisely, emphasizing saving, and avoiding unnecessary debt are ways to achieve financial prudence. I have seen people accumulate incessant debts all in the name of fashion, trends,, and things in vogue. For a person earning as low as #50,000 and wanting a Louis Vuitton bag worth #150,000 just to compete with someone earning over a million naira. Such individuals would land in debt which might ruin his or her financial status.

Reasons for debt

Looking at the present situation of the country, it is very easy to drown in the pool of debts due to some economic constraints. One of the reasons for debt is living above one's income, such as the example I gave in my introduction. This is why many individuals are in so much debt today, which is causing them peace of mind after borrowing money from different loan sharks to satisfy their wants, not need. It is advisable to live within one's income which is one way to save and improve standards of living. Under this factor, comparison and coveteousness can also be analyzed; some live above their income because of comparison, and they want to be like their friends, knowing fully well they don't earn as much as their friends.

Another reason for debt is financial inexperience. Wondering what this means? The rate at which teenagers are scouting for money in this generation is alarming and most of these youngsters have little or no idea of how to manage their finances and build a sustainable wealth for themselves. In the long run, they ended up squandering the money on irrelevant things that were not needed for their age at that particular time. Some time ago, I heard the story of a seventeen-year-old boy who was privileged to get a huge amount of money from a means not so clear to the public. At that time, he was expected to seek financial advice and invest wisely to protect his financial future but instead, he went ahead to buy a car. A car that claimed 90% of the money he got. Due to inexperience and lack of good maintenance, the car developed faults, and he had to let it go; it was then the news was widely spread on how he squandered such an amount of money.

Mindset for Financial prudence

If those we refer to as millionaires or successful billionaires are not prudent with their finances, they wouldn't be regarded in such high esteem as they are today. Financial prudence comes with a mindset of budgeting, which is tracking income and expenses. Some say it's stingy people that budget, but that isn't true. Budgeting is one of the things I learned from my parents, we budget almost every spending in my household. We don't go to market without a full list with prices backing up everything we intend to buy and trust me, our purchases don't exceed that budget although there might be changes in prices at times, a miscellaneous is being added just in case the price changed but anything outside that list won't be attended to. My parents gave me a financial education I am grateful for which has helped my finance management.

A mindset of saving should also be possessed by anyone who desires financial stability and freedom. It is a good way to manage one's finances. Even as a child, I practiced savings from the little I'm being given by families or my parents sometimes. This helped when I needed to get things at that young age, most of what are junk, but then let's focus on the saving part. Irrespective of what I later used the money for, I still had it saved up for some time. Saving plays an important role in cases of emergency, and also saving towards a goal makes achieving such a goal an easy task.

A mindset of investing is another important mindset one must possess when being prudent with finances. One should engage in smart investment that aligns with financial goals, not just investing because investment is good. There should be a clear purpose for investing. This helps one to reduce lavish spending and avoid debt. Investing in the right business that helps increase one's financial status is a big course on its known because investment can go wrong at times which might lead to financial damnation.

Finally, the mindset of debt and risk management is another criterion for financial prudence. This is where insurance and diversification in financial planning come into play. Many have no idea what insurance is all about, and this is a method that can save them lots of trouble, but just because financial education is far-fetched, many tend to discard it.

Until people understand the distinct differences between needs and wants, it will be impossible to practice financial prudence. Also, avoiding impulse purchasing, which to me is one of the top ways of lavish spending. Once a bad spending habit is overcome and all the financial steps listed above are followed, being prudent with one's finances will be an easy task.