This Is Why Most People Will Be Poorer in 2024 Despite Earning More
You cannot side-hustle your way to financial freedom if you do not do these 4 things first.
2024 feels like the year of the side hustle.
I don’t know if it’s the smell of financial crisis in the air, or the chilly nip of inflation, but more and more people are getting cued to the fact that times are changing.
And with these uncertainties, when you ask people how to be financially secure, the top advice is to make more money. But what if that’s not the right approach?
From rat race in the morning to hamster wheel at night
Like mice, we have all scattered to the wind, in search of our niche. In search of the one thing that will bring in the cash, we fantasize about at 2 am.
Trying to make a bit more money is a good thing. Worries about finances are a big headache for most people and being able to generate extra income is not out of greed but a desire to provide and protect oneself.
But be mindful that side hustling as hard as you can may not give you the financial freedom you so desire.
For some people working 9–5 in an office and then 5–9 at their kitchen counter, all this hard work will amount to naught. Similar to pushing a rock up a hill, only for it to roll back down as their financial situation worsens.
Why?
Most miss out on this 1 fundamental step.
Stop the leaks before you increase the flow.
Don’t fetch water with a basket. Plug the hole before you turn on the pipes.
Commonsense right? Well, it’s not that common.
Before you even try to earn more, first look at what you have at hand.
The ‘4 Laws of Financial Prosperity’ by Stephen Covey is a beginner’s guide to sorting your financial life. This book starts with the protagonist, a man in dire strait, wandering into his neighbor's house late at night to beg for money. The neighbor promises him much more than he could have asked for in exchange for him to be cooperative and learn a thing or two about money.
And boy, did our protagonist learn loads, so much so that by the end of the book, he no longer needed the loan. I learned just as much and I hope you can glean the wisdom from these words, too.
We can distill the core principle of the book into this dictum:
- Spend less than you earn and on what you need.
- Don’t spend at the edge of your creditworthiness, buying what you don’t need.
The laws of financial freedom
1. Track where it all goes to
Jim Rohn said the same thing in a funny anecdote about a man who wanted more money, but when asked how he had spent the one he had, couldn’t account for his meager income. The man said ‘It gets away from me’.
The response he received was, if the little you have got away from you, why should anyone give you more?
And it just makes sense.
Have you seen your pay slip before? Have you seen how everything on there is accounted for to the very last cent, penny or kobo?
That’s the same way you should be able to account for every amount you earn. No one throws in a few 10 or 20 bucks into your paycheck at the end of the month. The company is very meticulous about paying its employees and the employees should therefore be very meticulous about spending the pay.
Get yourself a budget tracker.
2. Target where your money should go even before you receive it.
Most people just receive their pay with no plans for it and as they wander down the street, anything that comes to their fancy gets bought. No. Big mistake.
Your money should be named even before you receive it. Like an expectant parent who is about to have their next child, start picking out names for every single dollar.
This dollar is named the Electricity bill.
This other one is named Bottomless Brunch.
That dollar is named 2 am telemarketing shopping spree. Oh wait, no, let’s rename that last one. Let’s rename it Emergency Fund.
When you target your spending, you will find that you don’t run out every month because you have already planned how to spend it before receiving it.
3. Trim
Spend less than you earn and on what you need. Don’t spend at the edge of your creditworthiness, buying what you don’t need.
Reading that, you will think the idea is to be eternally frugal, but no.
The idea is to match your taste at a comfortable level of your income.
You might have heard people say they don’t buy something if they can’t afford it at least twice over. That’s because if you have $1000 and you want to buy something worth $900 and you tell yourself it’s a good purchase because you can afford it, you are wrong.
You shouldn’t be living on the edge of your creditworthiness, nor even beyond it, scrambling to meet up with interest payments monthly lest you lose all you own.
Trim down the expenses and leave money behind, future you wants that left over.
4. Train your money to work for you.
Ever gone to the pound and picked up a new puppy? So excited for this new animal to be part of the family. But that excitement wears off after a few days as you realize it poops everywhere, knocks over everything, and doesn’t listen, even when you shout yourself sore. Basically, your puppy is untrained.
Same with your money. You graduate from school, get a job, and are handed this wad of cash every month. Amazing. You go from zero income to net positive income, but the excitement doesn't last.
The money isn’t acting as you expected it to act. It pees everywhere, knocks down the china, and runs out the door to the street, dragging you behind on the leash.
You have got to train your money. Stocks, securities, and real estate. Your money can work for you.
Even before your side hustle
Looking at all these laws of financial freedom, we haven’t talked about earning one penny extra.
That’s because the key to your financial freedom doesn’t lie in making more and more and more, but in learning how to use what you have, whether little or a lot.
I understand despite laying it out plainly, it can still be difficult for a lot of people to take control of their finances.
Probably because of a pesky sleep-robbing reason.
The 4-letter word. It starts with D.
Debt.
Debt and interest rates are like an ever-deepening hole, a constant leak, a smoldering fire.
It looks bad now, you look away and back again and it is even worse.
Stephen Covey outlined a special formula that people can use to blast their debt away. It’s called the Debt Eliminator Program and I doubt I can explain it as well as he did, so if confused, go check out the book 4 Laws of Financial Freedom.
But the lowdown of the Debt elimination program is that you need to aim to clear your debt as soon as possible because interest rates don’t sleep or slumber.
Debt Eliminator Program
If you have numerous debts, pay into them in piecemeal all at once. Name them from Debt 1 down to Debt infinity, making sure Debt 1 is the smallest so you can clear it first.
After clearing debt 1, the very next month, take the amount that would have gone to debt 1 and add it to what you pay for debt 2. Once debt 2 is cleared, take the amount that went to debt 2 and add it to the payment of debt 3. And so on and so forth.
This does a few things for you —
- It helps you win early. By clearing the smaller debt first, you hit a milestone of 1 debt off the table as fast as possible. Something to celebrate.
- Just like you can compound gain, you can also compound your debt payment as you transfer the premium from one cleared debt to the next one. A snowballing effect.
- It helps you build a habit. Debt is not something you pay once the collector's letter arrives in your letterbox, but something you map out and plan for. Remember, all money should be named like loving children, even the ones meant to pay off debt.
- With the debt eliminator program, you can actually project ahead of time when all your debt will be cleared, which is an exciting and motivating activity. The book comes with a blank debt eliminator program sheet that anyone can use to plan their own program.
Isn’t financial freedom exciting? I don’t know about you, but it gets me pumped because it opens my eyes to a world of possibilities. The possibility of a less stressful existence.
Disclaimer: I am not sponsored to talk about this book and the discussion here is information based on what I have learned from the book and does not stand as financial advice. Always do your own research and seek independent financial advice when required.
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