Welcome to Mo’s Letter, a series of weekly essays by Dr Mo on personal and professional growth in a digital world. Today’s essay is about debt.
Let’s say you spend R15,000 per month on expenses.
Your budget may vary of course, but I’m using this number to depict a young person (single, obviously) who rents a bachelor pad in the city and pays the bills (utilities + WiFi), buys groceries and fuel each month, and enjoys small creature comforts: restaurant meals here, movie tickets there, some drinks with friends every now and then.
Dividing this figure by 30 days gives you R500. This is your daily debt.
When you wake up in the morning — before you’ve brushed your teeth or washed your face or checked your phone — you already owe R500.
You’ve got 24 hours to determine how you’re going to make that R500 and pay yourself back.
If you have a job and your monthly salary divided by 30 days gives you R500/day, then you’ve just barely paid back your debt. Of course, this means you’re spending all your earnings each month, and it’s only a matter of time before bankruptcy beckons.
If you’re self-employed, studying, or both, then you need to figure out how to pay your daily debt each morning. The sooner you can do this each day, the better your bank balance will look month-end.
Unless you have a trust fund or generous parents bankrolling your lifestyle, the standard way of paying down your daily debt involves selling something. This could be a product you make, a service you offer; maybe a few hours of your time each week.
If you make dresses that sell for R250 each, it means you need to sell at least two dresses each day — just to break even — and then one more for profit.
If you are an amateur graphic designer who charges R200/hr, you’ll need to find three clients (or one client who needs three hours worth of work) to pay down your daily debt. If you’re a skilled graphic designer, you could charge R500 and only need to deliver one job a day — preferably two for profit.
Naturally, the more jobs you can do in a day, the better off you are. The smarter move, however, is to go for bigger jobs that pay your debt for several days in a row.
Instead of fishing for small daily graphic design jobs on Upwork, position yourself to land bigger projects — these will pay you a large amount of money (say, R5,000 to design a brand CI) and earn you breathing space for several days at a time (ten, in this case).
Breathing space lets you think
Thinking and planning ahead both allow you to invest more time and effort into fine-tuning your growth engine (marketing, branding, business management, and investments) rather than spending it all on fuel (the energy used to complete the actual tasks).
For any of this to work, however, you need to know how much you spend on monthly expenses; down to the last buck.
There are many apps that can assist you with this: I use Money Manager on Android. After a few months of tracking your transactions, you’ll have a rough idea of your daily debt.
Living is not free
As your alarm disrupts your dreams and pulls you into reality each morning, you likely already owe several debts to yourself: your student loans (for the past); your car loans, rent/mortgage, and living expenses (for the present), and your planned trips, startup capital, kids’ college funds, and retirement fund (for the future).
You’re always accruing debt with each breath you take. Forgetting this crucial fact leads people to make silly decisions that eventually add up.
When your friends call you out for drinks, have you already paid your daily debt for that day? As you consider buying that new iPhone, how many daily debts will it cost you? Have you landed any gigs yet to justify that purchase?
By the same token, assess every new opportunity or activity you venture into in terms of its ability to pay your daily debt faster.
- New course? Beneficial. Sign right up.
- Coffee date with a potential client? Beneficial. Invest the R100 into cappuccinos to get a juicy contract.
- Hot, “urgent” opportunity to invest in forex or bitcoin? Slow down. That’s just you paying someone else’s daily debt.
The numbers must always add up. Don’t take on more daily debt than you can stomach (live within your means) and always aim for bigger, better-paying jobs and gigs.
Now, how much do you owe yourself today?
You’ve only got a few hours left.
In my last post, I explained the concept of “selling hammers” — why you should sell the tool and not the product. Here’s why:
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Mohammed Shehu, Ph.D. writes on content and marketing for creators and brands. You can find him online @shehuphd everywhere.