Take control of money, or it will control your life

REUTERS

Real wealth: The famer who buys land for cash has saved up to do so.

We think money is inert. But this is not true. Money is controlling.

Consider how much of our emotions are expressed in the way we treat money: savings require a lot of patience, whereas debt indicates our impatience.

There is nothing written in any rule book that says we have to acquire things on debt or credit.

If we can have a farmer – I know one – buying a second, third, or even a fourth farm for cash, how can we not afford to buy a jacket for cash?

It’s true the farmer might have a much larger income, but he also has bigger expenses. The difference between such a thriving farmer is that he saves the money that is left over after he has paid his expenses.

He accumulates the money – he doesn’t spend it. Once he has saved enough, he buys another farm. The rest of us, on the other hand, spend our savings on clothing accounts, car loans and home loans.

The difference is not in the expendable income, but in our emotions and attitudes. Our farmer expresses far more patience than us.

Furthermore, our farmer knows he can’t spend the proceeds of four farms in his lifetime, and knows that most of what he accumulates will benefit children in the future.

The rest of us run the real risk of dying with bankrupt estates, as we might have sacrificed our life insurances because we could no longer afford them. Travesty. You have to take control of your money – or money will take control of your life and enslave you.

Last week I prepared a course for delivery at a business client and used the Richest Man in Babylon principles as the main theme.

I am passionate about teaching people to pay themselves first. Let me tell you how I interpreted the pay yourself first principle in my life. Twenty years from retirement, I realised there was not enough time left to accumulate sufficiently to provide in my old age unless I was smart.

Also, I left it too late to save enough and buy for cash (as our farmer did) as I only had enough time left for repayment of only one more home bond – 20 years.

The smart plan arose from a new interpretation of the pay yourself first principle, which indicates that the first 10 percent is mine to do with as I wish.

I accumulated enough in savings to use as deposits on five, rather than merely one other property. I then used my 10 percent to contribute towards the repayment of the bonds.

Because I realised the importance of doing things right, I also read the influential Rich Dad Poor Dad. Many people have heard about this book, but only a few took the trouble to read it and to apply the principles correctly. Those who didn’t, burnt their fingers.

In establishing my portfolio, I followed the tried and proven principles to the T. I could only accumulate five properties in accordance with the principles, but I have managed to hold on to them despite the economic topsy-turvy.

Here are some of the lessons I’d like to share with you:

l Do not copy others’ successes without studying them and applying the suggested principles correctly. Buy the book.

l Do not go on hearsay and base your decisions on people’s opinion. Do your own homework, get the facts, do the maths. You can pay someone to give you expert advice when you need it.

l Success stories are not free and must be bought, just as with good advice that will not come free. Kyosaki made a fortune from the sales of Rich Dad Poor Dad that contained his winning formula.

l Make a choice and do not allow for the default option. Make your own interpretation of how you will apply the first 10 percent on yourself. If not, you will most probably find that your 10 percent is already being invested in one or more personal accounts that were made to consolidate some other debt accounts.

l Deon Hattingh is a certified financial planner and trainer. Visit www.makingSENSE, or e-mail deon@makingsense.co.za