Principles, mental models or rules are necessary tools for all individuals, as we battle our way through the vicissitudes of life. This article looks at three valuable principles that would help you live a well-balanced life.
Do not let your debt rise faster than your income because your debt burden will crush you.
We are living in the best of times to purchase or do anything we want, due to the leverage the internet has provided us. However, this leverage is a double-edged sword because it can also push us to ruin.
Social media has made life unbearable, knowingly and unknowingly, for young adults who are now more than ever closer to their families, peers, entertainment idols and other unknown entities who showcase flashy lifestyles which put youths under pressure to do whatever is necessary to meet up.
Companies, through the use of top-notch adverts, are constantly creating scenarios that force consumers to live above their means.
It is necessary to understand the root cause of a problem to make it easier to tackle. There are many reasons why people go into debt and below are some:
- Rising inflation outstripping wages
When real inflation is rising and constantly outpacing wages, it will be difficult for households and individuals to keep up with their responsibilities because goods and services become more expensive than an individual can sustain, leaving no other option than to borrow.
- Lack of financial discipline
If an individual has an insatiable appetite for consuming without measuring what the spread between his income and expenses are, it will be difficult to live a sustainable life without resorting to borrowing.
- Peer Pressure
The classic line of keeping up with the joneses holds water here. Nobody wants to be seen as the one not doing well in a clique, hence the need to fund a lifestyle to be at par with friends is a major factor in debt accumulation.
Why debt is bad
- Costs more – You pay a price which comes in the form of constant interest payments.
- You are essentially borrowing from your future income which means you have less to accomplish in the future.
- It can lead to stress and serious medical problems. It can also hurt marriages and relationships by putting unnecessary pressure on household finances, whilst creating a lack of financial security for the spouse and children.
There are many things that cause ruin; debt is one of the surest ways to ensure a life of destruction. Don’t get me wrong, debt isn’t an entirely bad thing but always ask yourself before you borrow if you are using the money to create economic value or for things that would yield higher returns than the principal at a certain time in the future.
Don’t let your income rise faster than your productivity; you’ll eventually become uncompetitive.
Are you one of those who count the clock and watch the days go by at work feeling okay with not accomplishing much in a given day, or do you feel empty when you go through a day without being able to state your achievements?
A lot of people are just interested in earning/making money without putting in the required effort, while others have had a considerable level of success but have gotten disillusioned by it, so they rest on their oars, get comfortable and stop improving.
In life, there is a law for everything and the relationship between income and productivity isn’t an exception.
The law of productivity states that all income depends on productivity, yet many people never think about figuring ways to increase productivity. The key is to ensure that no matter what you do, always put in a considerable amount of effort that is more than the income you are getting. That way, you would always be ahead of the competition because you’d be irreplaceable.
[READ ALSO: How to know when your debts have gone overboard)
Do all you can to raise productivity, because, in the long run, this is what matters most.
Continuing from point 2 above, the principle behind this is to be aware of the fact that no matter what you do, your productivity must always be on the increase. Productivity can come in several ways, depending on what you do.
It could be improving your health condition by eating better and maintaining a fitter lifestyle, or improving certain skills to make your job more efficient, amongst other things.
For example, if you work 9-5 at a job, you should constantly be developing skills that are not just relevant for the job but also in anticipation for the role in the next 10 or 20 years. Look around at others who are doing what you would like to do and are quite as successful as you want to be and find out why that entails. What skills did they acquire along the way to help them attain their present status?
The key is to have a long term thinking cap, and not just aim to be rewarded where you are.
You are treating yourself like an investment where you are gradually compounding interest rates for a future date when you will finally cash out a lump sum.
Article was written by Segun Olarinmoye