Is Your Thinking Keeping You Poor? Article 58: "It's working! Think I'll bankrupt myself with a new car"
by Douglas Kruger
‘It’s working! I will immediately bankrupt myself with a new car!’
You know what’s awesome? A Maserati!
The money begins to flow and you have a couple of good months. Really good months. You dramatically increase your living standards – new car, new clothes, gifts for all and sundry — and, as it always happens in the business cycles of entrepreneurs, the next two months are disastrous. You’ve overextended yourself, and could take years trying to recover.
Don’t make the amateur mistake of creating certain future debt, when future income is uncertain. Don’t make the mistake of assuming that good times will last forever.
Sometimes, we overextend ourselves based on even less than a few good months. It’s not uncommon to see entrepreneurs on the brink of a big deal spending the money in advance, confident in its security. The deal goes south (which can, and does, happen, and which will likely happen to you many times), and suddenly you’re much worse off than before.
Better to reinvest your earnings into your business to keep it growing. This is also the point at which you can begin saving, and saving will start to make a real difference now that you are generating income.
A safe assumption is that your income will rise and fall in waves. You will have good and bad times. Sometimes, the downward trend in earnings could indicate that an idea has run its course or an industry is coming to an end. You may need to be agile enough to move on to the next thing.
Either way, spending conservatively and reinvesting your money is the smarter reaction to new wealth. Don’t turn your big chance to escape poverty into insurmountable debt.
Poverty mindset: I’m rich! Spend, spend, spend!
Wealth mindset: I’ve caught a break here. This is my big chance; I’m going to use it wisely.
Douglas Kruger is a business author and professional speaker. See him in action, or read his articles, at www.douglaskruger.co.za. Douglas’s books, including ‘Is Your Thinking Keeping You Poor? 50 Ways the Rich Think Differently,’ are available at Exclusive Books, Estoril, CNA, and as ebooks from Amazon.com