There is no doubt that earning money is not easy; especially in today’s competitive market but spending and investing it correctly is a whole new level of perplexity. Despite some entrepreneurs managing to earn hefty amounts, a lot do not have experience managing it, so they quickly end up broke due to their bad spending habits. In this regard, you might want to hear some words from someone who is a connoisseur at good investment choices. David Imonitie Jr., a multi-millionaire and serial entrepreneur who has a strong investment portfolio and has helped thousands of individuals earn income online, has his own formula when it comes to managing your personal cash outflows.
“Spend on yourself first!”, says David, when asked about the most fundamental thing to do with the money one earns. He said to use 10% of your earnings to purely spend on yourself. It can be anything that adds improvement to your personality, comfort, or knowledge. You also need to treat yourself a bit. After all, everyone has some small desires, material or not. Spending first on yourself will keep you motivated enough to keep working. At the end of the day, the person who deserves the most out of your earning is you!
Spending on charity and good causes comes second. David says to spare at least 10% of your earnings for charitable donations. He repeatedly says to make other peoples’ lives better so that yours can become better too one day, as this is where fulfillment in life lies. Those worst off in society have a right to your earnings and a right to be looked after in your own capacity. This is perhaps the fundamental concept behind every welfare state in the world. David personally spends money on police reform and poverty relief in Africa. Lately, David has been contributing money for Coronavirus relief as well. This is a necessary step that we all should take no matter what our profession is or how much we earn, so we can help those who cannot support themselves.
Thirdly, David spends 25% of his earnings on living expenses like housing, utilities, food, clothing, etc. After all, these are the fundamental expenses that we all have. However, you should not increase your living expenses to such a high level that your income falls short to fulfil them. Keep your expenses limited, especially during your struggle phase. David recommends moderation in this regard, so if you can live in a reasonably-sized apartment then there is no need to move into a big mansion unless you can afford it and your job and social status allow you to have such luxuries. Even once you can afford a more extravagant lifestyle, it is wise to keep your expenses under your full control. Do not spend just to look rich is the main takeaway here.
Now, you may wonder why so many business tycoons can continuously grow and prosper while also having a lavish lifestyle. Well, this is because they all tend to reinvest back into their businesses. This money is often considered to be the lifeline for businesses by most economists and financial advisors. A business cannot grow exponentially without sufficient investments put back into it. And most people believe, the greater the investment, the better the return on investment (ROI).
Finally, after paying all the direct and indirect expenses, you are left with your net profit. It may be a good idea to diversify this into low and high-risk investments. Different portfolios could include investing in the stock market, forex, and real estate, but be extra careful and do thorough homework before making such investments because you surely don’t want to lose your hard-earned money by your own hands.
Overall, it is important to be spending your income wisely and choose the investments which will give you the highest fulfillment levels as well as ROI for your business and those around you.