Acting rich won’t make you a millionaire
Aug 11, 2011
Topic of the week: It is usually when hard economic times hit us hard that we start regretting our poor saving culture. It also helps to live in reality not dreamland, call it false pretence.
Sylvia Juuko
Topic of the week: It is usually when hard economic times hit us hard that we start regretting our poor saving culture. It also helps to live in reality not dreamland, call it false pretence.
The current financial pressures have rekindled fear of what is in store for us regarding our personal finances.
At a global level, the turmoil in the stock market and the challenges in the Euro zone will not give you any comfort. Locally, the current macro-economic challenges are testing our resilience.
However, it is during times like these that we re-examine our financial goals and assess whether our habits support our wealth-creation aspirations.
Many of us have repeatedly affirmed our commitment to creating wealth, but do our actions match our dreams?
One of the things you need to consider is not mistaking the trappings of wealth with wealth itself. What can set you apart from millionaire wannabes who act rich is the number of months your household can survive on passive income without working.
You also need to look at your current biggest expenditure, which should be accommodation. Is your choice or location regarding accommodation ideal for your wealth-creation goals?
If you are paying rent through the nose, yet you do not have any plans to buy a house or purchase land for construction, this needs review.
Renting a home in a leafy suburb to match a lifestyle or maintain a corporate image without any plans to buy a permanent home, is not a prudent financial decision.
You can choose a cheaper location and pay less in rent as you work on acquiring a permanent home.
Owning a home will give you a lot of leeway to leverage your income to create assets that bring in passive income.
If your financial circumstances and goals allow, you can opt for a mortgage and turn your rent into monthly mortgage payments. Regarding your household expenditures, there are a couple of items that you can defer until you financial position improves.
Ask yourself if your health can deteriorate without pay TV. If you can survive, then it is not prudent to maintain subscription to a pay TV. There are a myriad of cheap DVDs on the market that can provide an alternative for those addicted to TV.
Entertainment is another household expenditure that can drain the household finances if not properly planned.
Given the challenging times, you can be creative and find pocket-friendly means of entertainment.
On the other hand, if this is a planned-for expenditure, you can save a percentage of income for this activity.
Transport is also a cost that you cannot bump off your expenditure.
Assuming your household has more than one car, you can use one car to save on fuel. Other alternatives include car-pooling with neighbours, if you enjoy good relations or take a taxi and use the car for only when you cannot avoid it.
All these measures can help you save money for future investment.
To beat the current financial crunch, contributing to your savings co-operative or investment club is another habit that boosts wealth-creation aspirations.
Members of these groups have benefited from the power of group dynamics in savings mobilisation.
Most importantly, the money savvy ones have been able to leverage their savings to buy assets that have boosted their wealth.
Some of these measures appear simple, but are not easy to implement. With the prevailing economic conditions, it makes more sense to rally your household around changing practices that are not compatible with creating wealth.
If you cultivate a habit of delayed gratification, you can create surplus income for investment to meet your wealth-creation goals, which can in turn provide a buffer to economic hardship.
On the other hand, if you focus on trappings of wealth and extravagant lifestyle, which are usually financed by consumer loans, you are setting yourself up for financial failure.
The writer works for Bank of Uganda
Topic of the week: It is usually when hard economic times hit us hard that we start regretting our poor saving culture. It also helps to live in reality not dreamland, call it false pretence.
The current financial pressures have rekindled fear of what is in store for us regarding our personal finances.
At a global level, the turmoil in the stock market and the challenges in the Euro zone will not give you any comfort. Locally, the current macro-economic challenges are testing our resilience.
However, it is during times like these that we re-examine our financial goals and assess whether our habits support our wealth-creation aspirations.
Many of us have repeatedly affirmed our commitment to creating wealth, but do our actions match our dreams?
One of the things you need to consider is not mistaking the trappings of wealth with wealth itself. What can set you apart from millionaire wannabes who act rich is the number of months your household can survive on passive income without working.
You also need to look at your current biggest expenditure, which should be accommodation. Is your choice or location regarding accommodation ideal for your wealth-creation goals?
If you are paying rent through the nose, yet you do not have any plans to buy a house or purchase land for construction, this needs review.
Renting a home in a leafy suburb to match a lifestyle or maintain a corporate image without any plans to buy a permanent home, is not a prudent financial decision.
You can choose a cheaper location and pay less in rent as you work on acquiring a permanent home.
Owning a home will give you a lot of leeway to leverage your income to create assets that bring in passive income.
If your financial circumstances and goals allow, you can opt for a mortgage and turn your rent into monthly mortgage payments. Regarding your household expenditures, there are a couple of items that you can defer until you financial position improves.
Ask yourself if your health can deteriorate without pay TV. If you can survive, then it is not prudent to maintain subscription to a pay TV. There are a myriad of cheap DVDs on the market that can provide an alternative for those addicted to TV.
Entertainment is another household expenditure that can drain the household finances if not properly planned.
Given the challenging times, you can be creative and find pocket-friendly means of entertainment.
On the other hand, if this is a planned-for expenditure, you can save a percentage of income for this activity.
Transport is also a cost that you cannot bump off your expenditure.
Assuming your household has more than one car, you can use one car to save on fuel. Other alternatives include car-pooling with neighbours, if you enjoy good relations or take a taxi and use the car for only when you cannot avoid it.
All these measures can help you save money for future investment.
To beat the current financial crunch, contributing to your savings co-operative or investment club is another habit that boosts wealth-creation aspirations.
Members of these groups have benefited from the power of group dynamics in savings mobilisation.
Most importantly, the money savvy ones have been able to leverage their savings to buy assets that have boosted their wealth.
Some of these measures appear simple, but are not easy to implement. With the prevailing economic conditions, it makes more sense to rally your household around changing practices that are not compatible with creating wealth.
If you cultivate a habit of delayed gratification, you can create surplus income for investment to meet your wealth-creation goals, which can in turn provide a buffer to economic hardship.
On the other hand, if you focus on trappings of wealth and extravagant lifestyle, which are usually financed by consumer loans, you are setting yourself up for financial failure.
The writer works for Bank of Uganda