ARTICLES ON FINANCE

DATE:  2 March 2003

SPEAKER:  Pastor Tayo Adeyemi

TITLE:  Breaking the cycle of insufficiency

TEXT: Proverbs 10:15

Last week we looked at the three qualities required for effectively managing your money.

• Financial Literacy
• Financial Competence
• Financial Responsibility

We did an analysis of money on two levels:

• In relation to God
• In relation to the world

In relation to God, we learnt that: Your money is your life. Your money is the amplifier of your heart. Your money is the litmus test of your true relationship with God.
In relation to the world, we learnt that: Money is a means of exchange. Money is a measure of value. Money is a medium for wealth storage.
We learnt that to be financially competent, you have to know more about money than just earning it and spending it. In order to master your money, you must know how to make, manage and multiply it. Finally we learnt that financial responsibility means that you can exercise self restraint. Have a financial plan. Embrace delayed gratification. Proverbs 10:15
I have come to discover that poverty is a cycle - just as wealth is a cycle. Wealth creates more wealth and poverty creates more poverty. It is easier to become richer if you are already rich. It is easier to become poorer if you are already poor. The rich man's wealth works for him and protects him. The poor man's poverty works against him and exposes him.
Poverty is a cycle. So it tends to repeat itself and perpetuate itself unless it is broken. Poverty has very little to do with how much money comes to you. It is more a function of how much money stays with you. Regardless of you much you earn, it is possible to always be broke. Over the years, people develop habits, patterns and attitudes to money that keep them permanently broke inspite of an increase in income. If you don't save when you're earning little, you won't save when you earn much. If you gamble when you earn little, you will gamble when you earn much. More than 80% of lottery winners go broke in 5 years. Why? They were not competent enough to handle the windfall.
In order to break the cycle of poverty here are three things you need to do:

1. Reduce your outgoings
2. Make what you have work for you
3. Increase you income

Reduce your outgoings

First turn on the lights. Write things down. Proverbs 24:3, 4 (LB) Make a list of your income You may find that money comes in from more than one source. Make a list of your expenses - account for every penny that leaves your hand. You will find that your money goes into four major areas of expenditure:-

1. Necessities
   Debts, bills, rent, mortgage etc. Essentially, things that provide food, clothing, shelter and transportation.
   
   
2. Desirables
   These are not absolute necessities, but they certainly make life a lot easier. A nicer car, better clothes, new furniture. It will not be a disaster if you don't have them
   
   
3. Luxuries
   Things considered an indulgence rather than a necessity. More than what you need or even want - the high end of desirables.
   
   
4. Wastage
   Thoughtless or careless spending. Spending that yields no results. Most of us waste more than we care to admit Food, other consumables - electricity, gas, water, phone, shampoo, paper.

Your first assignment is to cut out your wastages, your luxuries and a good portion of your desirables. Just by doing this, most people will reduce their expenditure by at least 30%
Now, when you turn the lights on, don't turn them back off until you're in control. Keep an accurate record of all your financial activities - daily, weekly and monthly records Give a three month period, you will get a good understanding of your financial habits, patterns and attitudes over the next three months, you will bring it to where you want it to be.
Next, you need to draw up a budget - and respect it. Don't go outside your budget unless there is an absolute emergency. Your aim is to spend 80% of your expendable income, so you can start a savings plan.
Reducing your outgoings is the most important step towards financial freedom - and probably the toughest. Most people think of increasingly their income first - because it appears to be the quickest and most painless solution. But in fact, is not really a solution.

Make what you have work for you

This is applicable on two levels: First start a savings programme. Your aim is to save 20% of your income. You may not be able to start with 20%, but that's where you want to go eventually. This is the beginning of true wealth - it is the first step towards building your assets.
Proverbs 21:20 "The wise man saves for the future, but the foolish man spends whatever he gets" LB
Next, sell off what you don't need. You will be amazed at the market value of things that are cluttering up your house, which you could easily live without.
Make a list of everything you own and divide them into three categories:

1. Things you definitely need
   
2. Things you could live without
   
3. Things you don't want to keep

Many of us never consider the possibility of selling stuff - all we ever think of is buying.

Increase your income

This should be the last option on your list. Why? Without a change of attitude an increase in income simply means an increase in expenditure.
Most people have had an increase in income in the last five years yet they're not financially better off. If you earn £100 more today, you don't really have £100. You have about £50 or £60 extra. But if you cut your expenses by £100, you have £100 more to apply where you really want. But it is also important to think of ways of increasing your income:

1. Get a second job
2. Do overtime at work
3. Find a better paying job
4. Ask your boss for a raise
5. Start using your creativity to make money

The rule is: protect your relationship with God and with your family.
Finally, involve God in the process. You cannot truly break the cycle of poverty until you become a giver. Your best efforts will only take you so far. Your habit in giving is either taking you towards poverty or taking you away from poverty. Proverbs 11:24,25

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