Financial planning - the influence of people around you.

Another major factor which restrains people from planning their finances is the influence of people around them. The influence people around you have over is very big. The people around you can be defined as your colleagues at work, classmates, associations members, your neighbors, friends, and fellow club members, among others. People who belong to the same group in any situation always look at others as role models or copy something from them. These role models influence how they dress, speak, and also influence their spending behavior. For example, women generally desire clothes they see other women wearing. Let me use my wife as an example here.

My wife and I have family friends just like many other couples do. However, we have one family friend that is closer to us than the others. After sometime, I noticed that my wife always wants to buy the same clothes her closest friend has whenever we go shopping. This is because her friend used to describe how the clothes fit her and the amount she paid for them. In order to show her that she can also afford them; my wife started buying the same clothes. At a stage, I was upset and I started complaining about this unnecessary competition. What annoys me most, though, was that there may be cheaper and more beautiful clothes for her to buy, but she wants exactly the types her friend is using. Generally, other items, such as, shoes, handbags, and jewelry are bought together with clothes in order to match. This can sum up to a big amount of money over time and can be an obstacle to financial planning, especially, if the apparels are expensive. This behavior is very common of women in every social class. I used apparels to give example here, but there are other situations where the same phenomenon occurs.      

Another example I observed carefully was the case of colleagues working in the same organization. It is unbelievable how this influence derived from implicit competition works. The workmates in the Organization I observed, especially the peers, drive cars whose costs are within the same range of values. For example, if one buys Toyota Corolla car of $35,000, others will try to buy cars in the same price range. Other cars in the same price range are Honda Accord or CRV, GM Cruze, Volkswagen, Ford Focus, among others. 

Another area of influence I noticed was the similarity among the neighborhoods in which these co-workers live. About 80% of the workers in this Organization live in wealthy neighborhoods. Although receiving the same salary, their family backgrounds are different.

Some come from poor families, others, from low-income families, and the rest from middle-class families. However, they drive brand new cars and pay expensive house rents. Looking at them from the outside, one will conclude that everything is alright with them. But, breaking down their expenses will reveal that they are struggling. Although having the same salary, they are involved in a competition which makes some of them spend more than they should as a result of differences in their background. Consequently, their financial planning is prejudiced. Let me use figures to illustrate my point. 

These workers I am using as an example receive the same monthly salary of $10,000 each. This salary may not be so high for workers in the developed countries, but certainly it is a lot for those living in the developing countries. From the monthly gross salary of $10,000, 30% go as tax, 10% as social security contribution, another 5% is set aside for pension plan contribution, leaving a net monthly salary or take home pay of $5,500 for the worker. From the net amount, the worker pays school fees of $2,500 for a child, pays condominium fee of $700 and mortgage of $1,000 monthly. He pays a monthly car leasing fee of $500, and $300 for a training course. What remains for him after these financial obligations is just $500. However, he has to buy groceries for the family, pay for his personal expenses, electricity bill, gasoline expenses, car insurance and maintenance fees, telephone bill, cable television subscription fee, newspaper subscription fee, gadgets for the family and for the only child he has. If his wife does not work, he cannot be able to buy groceries. Here is now the question. How can someone on such good salary not afford to have a good financial planning?

One of the reasons is the influence of the colleagues which made him or her live in an expensive neighborhood and bought an expensive car too. If not because of the influence of colleagues, he would have lived in a cheaper neighborhood where he would have bought a duplex which has no condominium fee. This would have also made him to send his child to a cheaper school and buy a used car instead of leasing a brand new car. On the whole, he could have saved condominium fee, mortgage payment, and $1,000 from tuition fee for his child. This would leave him a surplus of about $3,000 every month. This surplus will go into financial planning.       

So, try as much as possible to reduce these influences. On the contrary, your financial difficulty will continue irrespective of your income. Think about this!

  

Financial Planning and lure of capitalism

In my last post, I listed some of the main barriers to financial planning. In this post, we are going to look at how factor obstructs some people's ability to think about financial planning. But first, let us define the term "lure".   

According to the Merriam-Webster dictionary, luring is a process of enticing or seducing people to pleasure or gain which may lead astray from one's true course. Goods and services are generally presented to the public through advertizing on television, radio, the internet, newspapers, magazines, banners, billboards, among others. Advertizing Agencies are hired to create needs so consumption can occur. The role of the ad agencies is to find very creative ways to entice people with products or services. Another way of luring people and creating demand is by constantly creating new versions of existing products using elegant packaging and labels.

These methods are used by many industries, such as those in the high tech sector, automobile, apparel, cigarette sector, among others. Have you ever asked yourself why the auto industry launches new versions of the same cars every 2 or 3 years? What of the launching of smart phones every 3 months? What about the transformation of notebooks into tablets? Or transforming smart phones into wearable technology? What of the latest designs in sneakers of top brands? The list goes on and on and on. 

These innovations occur so the attention of consumers can be constantly held in such a way they will continue buying the products or upgrading them. In this way, the companies will continue making profit. If you buy one car and there is no new design for a long time, for example, the auto manufacturer will go out of business and their staff will lose their jobs.

Another example is the smartphones. New smartphones are launched every 3 months. These are launched as 1, 2, 3, 4, 5, 6, etc. A person with an old version sounds out of fashion and obsolete. In order to follow the trend, may people keep on buying the updated smartphones. Even the poorer ones show the same habit of changing phone.   

The lure of capitalism is a strong barrier to financial planning. From the examples given above, it becomes clear that many are trapped in the continuous cycle of purchasing new products or upgrading them. This practice consumes the income of many people to the point that they cannot save anything. 

Consider the case where some people buy brand new cars every 2 or 3 years. Instead of buying a used car which their budget can support, they prefer leasing a new brand car. The problem of new car is not only restricted to paying high monthly leasing cost, but also the insurance cost, gasoline, maintenance cost, car tax, among others. At least, the costs of insurance and yearly tax are directly proportional to the cost of the vehicle. In Brazil, for example, yearly car tax is 4% of the value of the car. The car tax must be paid for a period of 20 years. These extra costs are never considered before buying a car. 

It is impossible for one to submit to the lure of capitalism and at the same time make financial plans. The decision is yours. Do you prefer working all your life and die in misery or retire in abundance? Think about this! 

Why many don't many people have financial plan?

Even with the obvious benefits of financial plan, many do not have it. Although some might have tried to have it, they are dominated by implicit forces which they don’t understand. This is because most of the implicit forces involve emotion of people. Emotion is one of two ways information gets into our subconscious mind. Emotion is very difficult to control. The subconscious mind is the part of our mind that controls our behavior. The implicit forces which hold people back from having financial plan are:

(a) the lure of capitalism;

(b) influence of people around you;

(c ) luxirious lifestyle;

(d) lack of financial education;

(e) status-quo, and;

(f) over-sustaining grown-up children.


In my next posts, I will explain how each of these factors or forces affect financial planning.

Plan your spending before your income arrives!

Financial planning is considered by many a technical term only used by specialists in the financial market. Others consider the term something reserved only for the rich or big corporations. But, it turns out that everybody needs to plan his or her finances in order to use it wisely and meet up with everyday challenges, especially, the emergency ones. But, what is financial planning?

In a simple language, financial planning is the organization of one’s finances and the necessary discipline required to meet one’s challenges. It can also be simply defined as one living within his limit. Even if you consider your income small, you need to live within your limit as you work hard to improve your income. It does not make sense spending more than you have just because you don’t have enough income. Instead, think of what you can do in order to improve your income. Financial planning, as some people might think, does not imply living in misery, but simply means living within your means.

In order to put your finances in shape, you must have a plan of how you should spend every dollar or anyother currency before receiving it. In this way you can have complete control over your spending. Buy a notebook and give it a title as house expenses book. Write down all your bills in this notebook, giving priority to must-pay ones. Some must-pay bills are the ones relating to energy, telephone, heating, house rent, condiminium fees, etc. Although some of your friends might laugh at you at the beginning, you should be persistent because they will copy your lifestyle when the result starts appearing. Using this method will save you from debt. There is nothing more satisfying than having control over your money.      

One must be very careful about spending money because this is what we receive in return for our sacrifice and hard labor. Therefore, planning your spending before receiving your salary is a way to honor your hard work. Think about it!  

Reaching your maximum potential

In motivational or inspirational sessions, the most common questions asked should be the following. Do you think you have reached your maximum potential? How do you know that you cannot go farther than where you are currently? What are the barriers that are limiting your progress? Does your mind tell you that you can go farther? Are the barriers you have imposed by others or by yourself? Are you telling yourself the whole truth?

     You need to answer these questions because the greatest enemy to our progress is within us. If you can defeat this enemy within, there is nothing you cannot do. We can only go as far as our mind can see! It is not the obstacles that block our progress, rather, it is what our mind can see and how it sees it is the limiting factor. If you can see your desire in your subconscious mind and work towards it, you will come to know that everything is possible. 

     Those who reached their maximum potential are not those without obstacles of life, but those who push harder in order to accomplish what their subconscious mind showed them. Watch high achievers or successful people when they speak or give interviews and you will notice that you are even more skilled than some of them. If they make it, why can't you? If you don't reach your maximum potential, you are wasting your talent. Think about this!       

Why are some people rich and others not 2?

In my last post, I asked the question about the main factor which differentiates the two. This question has been asked for many years and by many people including policy makers. Because of the variety of reasons or answers to this question, many policies have been formulated to tackle the problem of poverty. Among them are food banks, different types of charities, relief programs, social programs by governments, and of late, the social entrepreneurship concept. In many countries, various politicians have have used social programs to manipulate people in order to remain in power. Some even become dictators through this process with the justification that the majority of the population approves their government. Among the mitigation programs, Social Entrepreneurship is the one very close to the ideal solution to the problem of poverty. Why is it the best? 

     Social Entrepreneurship is the best because it makes people think and and participate in the process of creating wealth and not just being observers. This brings us close to the answer to the question: Why are some people rich and others not?

     The main factor that determines the side in which one is found is the mindset. Other reasons may be given for poverty, but the number one reason is mindset. The defect of all the poverty reduction programs is that it does not include work towards changing the mindset of the poor. As a result, the poor thinks he or she is entitled to be receiving social security. We can achieve everything we want only when our mindset is directed to that. What is mindset? Mindset is just the subconscious mind. Everything we do reflects what is inside our subconscious mind. Unless what is inside the subconscious mind is changed, there can be no exterior change. Some people call the change the paradigm shift.

     Let me challenge you. Do you work with your subconscious or the conscious mind? Please, send me your input!             

Why are some people rich and others poor?

Why are some people rich and others poor? This is a common question many people ask. If people were born and raised under the same condition, why should some thrive and others, not? Many reasons have been given for this. Some say lack of education is the cause while others point to lack of inheritance as the main reason. If we take education as a factor, why are many uneducated people rich? If we also consider lack of inheritance as a barrier, what can be said of 70% of American billionaires who started with nothing? Many people consider the poor as not working hard enough. I do not know if this is true. Even if it is considered true, I would like to ask the reader a provocative question. Doesn't the poor work hard because he does not want to or because he does not know why he should work hard?

     Other reasons people give to justify the difference are religion, bad habits, ignorance, bad choices, among others. Religion cannot be a barrier because there are rich people from every religion. There are also rich people with bad habits and ignorant. We have people with ignorance from both sides although the level may vary. What is then the main reason why some people become rich and others, not?

     Think about one main cause for this difference. This discussion will continue in the next posts!

               

How do you relate to your boss?

It is common to have bosses wherever we work, be it in a religious organizations, charities, non-profit and for profit organizations. My question in this post is: how do you relate to your boss? The answer might seem very simple. I relate to my boss professionally. Even under professional setting, you should first understand who your boss is.
     You should how your boss behaves. Try to know the right time to talk to him or her, the principles that guide him, his or her philosophies, among others. Although he is a boss, he or she is a human being and as such, has the same feelings and behaviors as we do. For example, some bosses do not like their subordinates complaining when they give them tasks. Others do not accept subordinates without initiative while others completely reject those who submit tasks or reports late. 
     Once you understand the type of boss you have, you have a greater chance of forming an excellent team.
     

Ask yourself questions about your work

Have you ever asked yourself questions about your work? Do you know exactly what you do and how you can do it better? In order to differentiate yourself, you need to master what you do and how you can improve on it. Understanding what you do, how and why you do it is very important for your career progress. Think about it!

What is your contribution to your Organization?

Some people only complain about their salary and their organization. It seems they are never satisfied what they have. Then comes the question: how can you earn more? To answer this question, let me go back to my earlier posts where I mentioned the factors which make you to earn more from your Company. I mentioned these factors as education, committment, and dedication, among others. These factors can really transform you into someone different in the organization. How will that occur?

     

     The transformation occurs when you you use these positive attributes to make a recognizable contribution to the organization. You may be the brighest employee academically or in terms of behavior, but that must be transformed into a measurable contribution. It is only when this done that you can be recognized as being different. When you are different, your income will automatically be different. It is not your level of qualification that guarantee your income, but you produce with it!

     So, think about it. Before you ask for a raise, first ask yourself what you are contributing to your Organization.