It’s important to understand what wealth is and what it isn’t!
Elvis learnt this the hard way. He bought a car for five million shillings three years ago. Unfortunately, he lost his job. Things did not pick up in his business as quickly as he had expected and he was forced to make a lot of changes to his lifestyle. One of the things he had to do was sell his car which he sold for two and a half million.
By this time he had already made a significant loss on a lot of things. Given his current lifestyle & commitments (house rent, food, school fees, loan repayments etc.), he will most likely be able to survive on this money for around six months.
Before losing his job Elvis had never thought of this. Like many people he just expected the gravy train to keep moving. He now wishes he had the five million shillings he had spent on the car. It would have made him survive at least a whole year based on the same calculation (giving him time to grow and work on the business) He probably would have made some investments in the business which would have made it progress faster.
If he had actually invested the money it might have given him more months of survival. The decision to purchase the car is not necessarily wrong but Elvis now admits that had he thought this far he might have considered the risks a bit more. Yes, he was driving a nice car but at the risk of not being able to sustain himself even for one month without his primary source of income.
Is the car worth the risk?
We spend money we think we have yet we really don’t think through whether we can take the risk and afford it. It’s not just about cars, this may happen with a whole lot of things in our lives. Could Elvis really afford to make that kind of investment? With investments, the principle remains the same.
Wealth is what works when you are not working not what you are driving while working.
When Elvis bought his car society cheered him on. Nobody does that when you buy a piece of land, start a business, take up pig farming etc. On the other hand, Elvis also felt good. So whilst it may be logical and prudent to have considered the factors above we still end up making a lot of decisions based on emotion and for many of us it is these tough situations such as the one Elvis got himself into that jolt us into reality.
The truth of the matter is none of us wants to be in a crisis to always do the right thing. We need to learn to delay gratification. In other words, to have the courage to say No to ourselves. To have the strength to say No to other people.
We get subtle pressure from others without realising it. It may be your employer, family, spouse or even friends. That’s why I always insist that in this life you must always attach goals to your investments.
Many people claim to have goals but they don’t make them specific, time-bound and measurable. A goal that doesn’t change how you act or think in the present actually isn’t a goal but wishful thinking.
Do you have bigger goals than the car?
If so how will buying the car affect them? Is the car worth delaying them or can you really do both? We spend a lot of money looking wealthy instead of ensuring we invest in things that will make us wealthy.
Over and above the purchase price, do you know what that new car will cost you?
As much as Elvis bought the car with his own money, it was fueled, serviced and maintained because of his position at the company. They also catered for the insurance. The minute he had no consistent cash flow coming in he began feeling the dent of fuel costs. One of his breaking points was when he found himself having to make a choice between fuel and school uniforms.
I’ll end by saying that there is nothing wrong with upgrading your car but use the lessons Elvis has learnt and really evaluate if you can afford it? Maybe the time is just not right. It doesn’t mean that you will never do it. Our lives actually move on quite well without the things we think we need.
Waceke runs programs on Entrepreneurship, Personal Finance & Career Growth with registration currently open and ongoing through our website centonomy.com For more information get in touch with her through waceken@centonomy.com /Facebook-Waceke Nduati /Tweet @cekenduati