When Enough is Enough

by Tayo

Since this is the first time you and I are speaking, dear friend, I want to be careful not to insult you by telling you things you already know.

If you’re here, and we’re having this conversation, it’s because you’re already a good steward of your money, or on your way to becoming one: you know the basics of budgeting; you save assiduously; the life of faji-first is one you’ve left far behind you.

A life of fiscal discipline isn’t an easy one, and is probably less fun than the alternative, but there are payoffs. The question I’m answering might be related to such a payoff: After all that sacrifice, “when do I have enough for ‘the thing?’” How do I know when I’m ready to…

…buy a car?

…invest in my friends’ businesses?

…take my dream vacation?

…buy my next home?

Where exactly is the line where you get to finally cut loose and reward yourself with…the thing?

Well, it depends.

Have you been planning and saving specifically for this event? Do you have special savings account besides your actual savings account where you’ve been squireling money away for those shoes or that event?

If so, you’ll hear no complaints from me. You should do as you planned. Rewarding good planning is a sure way to ensure you’ll continue doing it. And ultimately, that’s what I want for you, and for myself.

But often, expenses come along that you aren’t quite planning for. A friend reaches out with an investment opportunity you feel you can’t pass up. Your car breaks down and you’re pretty sure there’s no saving her. The girl you’re pretty sure you’re going to marry has her eyes set on a pricy purse. How do you know if you have enough to make the call?

Here’s my personal checklist:

1: Do I Have Short-term Emergency Cash?:

My financial priorities begin with ensuring I have cash on hand for a minor emergency. Nothing breaks my heart more than seeing a hard-working professional undone by an AC malfunction. If you’re an adult, you want to be able to handle an emergency without running to Mom, Dad, or your guys. Heck, you want to be able to respond if they come to YOU with an emergency. The number varies across people, but when I started thinking about this, I wanted about 1 month’s worth of living expenses. That money is never touched…except for emergencies. Once I have that….

2: Do I Still Have Short-Term Debt?

Next, I go after short-term credit. Credit cards, loans from friends, retail debt, etc.   Any money I owe that isn’t secured by some other asset in my name (e.g. I don’t count car loans or mortgage loans here, because they are secured by an asset) is a priority for payoff. After all, if you still owe money on your last splurge, you aren’t ready for your next. But if I don’t, the next question is…

3: Do I Have a Financial Security Blanket?

This life can be a pot of beans, and sometimes, regardless of how hard you’re trying, circumstances beyond your control can turn your life upside down. Layoffs at work. A global pandemic rendering your line of work immaterial. Your main customer disappears without warning. A toxic work environment that you know you’re healthier leaving.

A key priority is keeping enough saved to manage through several months of a large shock. How many months? That varies by your comfort level. A friend of mine, Tomi, says 3 months. My neighbor smiled and said “several years” when I asked her. My wife and I found 6 months to be a good place to start. If we were both suddenly unemployed, our hope is that within a maximum of 6 months, at least one of us would be able to find something new.

4: And then?

Once the boxes above are checked off, my personal advice would be to invest as much as possible. Yes, even before paying down secured or long-term debt. But that’s a different story. What YOU want to know is “should I buy that ?”

My rule of thumb is simple: for consumables, could I buy this thing twice without affecting #s 1 – 3 above? If I had to buy this plane ticket twice, would I have to reach into my Security Blanket? If I wanted two pairs of those earrings, could I buy them without taking on credit card debt?

If the answer is no, I’d advise you don’t move forward. To my mind, you can’t afford it. Why? Because the idea of Steps 1 to 3 is to create a bit of cushion for yourself and your family, a cushion big and soft enough to absorb the impact of your habits and of your taste.

Odds are, that won’t be the last trip you take, and this won’t be the last pair of shoes you’ll want. By applying this 2x rule, I ensure I’m keeping enough distance between my habits and my good behavior to withstand bad behavior.

One caveat: for structural, secured expenses like a home or a place of business, the rules are different, and I personally reduce my multiple from 2x to 1x. But even then, my check is that I be able to complete the transaction 1x without impacting #s 1 to 3 above.

If you have to risk financial security in the short or long term to buy a thing, you can’t afford it. You don’t have enough. You will one day, but you’re not there yet.

To be clear, living by these rules hasn’t always been fun. It’s meant not doing things I felt I *technically* could afford. That has sucked, especially when everyone around me – or you, in this case – isn’t playing by the same rules, and is living in full jaiye at all times.

But you aren’t “everyone,” are you?

In 2018, I was getting married. My wife and I both graduated from school with debt and very little by way of savings. Not only did we want a beautiful wedding, but we wanted to buy a home, and wanted none of this to be a burden on our parents.

This framework dictated our approach. With our incomes, we could shoot for a Bella Naija wedding and create a lifetime worth of memories…or we could follow the plan above and focus on financial readiness.

We followed the plan. Each month between our engagement and wedding date, we both put money into a joint savings account. First we built up a small emergency fund in case either of us needed it. Then we began paying off our credit cards.

Once we completed those, we started building a six-month buffer fund while also saving for our wedding. We determined how long our engagement would be by how long it would take us to save for BOTH a wedding and a Buffer. We got calls from friends, family…watched other friends get married…friends asked us if we were serious. (We aren’t friends with such people anymore).

By the time we’d started making reservations and vendor invoices started to arrive for our wedding, we’d only saved 75% of what we needed for our “dream wedding,” but had 100% of what we felt was financially “ready” position.

The year after we got married, a close family member of ours needed surgery. When we got the call, we were ready. No Go Fund Me. We put family first and pulled the cash out of our emergency account.

The year after that, one too many bad interactions at work left my wife deeply disaffected. Looking for a job while working full time, so we took a risk: she quit her job, and had a 3-month window between her old job and a new one. There was no pressure to rush – our 6-month buffer more than met the need.

Neither of these things would’ve been possible had we not followed the plan.

Did we trade down on a few things? Yes. Did it suck? Yes. But in the end, with a little discipline and a lot of grace, we found what the actual goal is: freedom. Freedom to help. Freedom to leave a job that makes us unhappy. 

That is the freedom I want for you.

Let’s talk again soon…

Tayo

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