David Bath and co author John David Mann used a parable to tell us about financial wisdom using a person that you can relate to. This was excellent for me because I learn more through stories than points (I then pick up my points from the story). It was a very easy read and one of those books you don’t want to put down until you know where the story ends.
Funny enough even though the book was a personal finance book the lessons were both about finance and life in general which made it extra cool.
Lesson 1: Defined priorities informs what we do with our money
He says the reason we don’t save or save the bare minimum is because we don’t have a compelling enough reason. It’s not about the big house, or new car but it is about what those things bring us that matters. Which means it is more important to decide what matters to you, then ensure that your everyday actions bring us closer to those things. Because if the reason is not compelling enough it becomes difficult to maintain as time goes.
He encourages living rich now, as an example if adventure is what matters to you, ensure you spend is aligned to that and start small to get the encouragement to invest more so that you can experience more adventure.
I find I am more disciplined to save good percentages when my reasons are more compelling, otherwise I save the money but end up spending it on silly things.
Lesson 2: Automate payments (Make it automatic)
This is my most important lesson, he says automate whatever you want to do with your money. i.e. If you want to save for a holiday e.g. to go on holiday to Cape Town, create an automatic monthly debit order to your savings account where you want to save for your holiday. I don’t know about you but while I save I don’t always adhere to my savings goals because something that can most of the time wait comes up and detours my goals. So if I create a debit order like my monthly instalment it will ensure that it happens months. It is even cool now because the banks now allow you to create goals with target amount all your savings accounts. E.g Goal: Cape Town Amount: R8,500 and you save whatever amount you can afford.
So let’s automate our way to living out all our dreams.
Lesson 3: You are richer than you think
Everyone must start where they are at in terms of their income earnings. This starts with changing your habit “from just spending on yourself to paying yourself first”. This is where the ‘Latte factor’ comes in. The ‘Latte Factor’ is a metaphor about how you spend small incremental money on things you could happily do without. In the past year I started a bad habit of not bringing breakfast and lunch from home and opting to buy them. As you can imagine the costs add up, what he is saying is that part of my extra money is wasted by this. So I can opt to only buy coffee and only buy food twice a week. That will save me a good +/-R200 a week which can go towards building my dreams. It doesn’t matter what the amount is, but it is about being more intentional about making sure our money gets us closer to our dreams and we don’t just spend it on things that bring us nothing. This however doesn’t substitute for saving on big things.
He referred to the ‘Paying yourself first concept’ which is not a new concept the first time I read about it in The richest man in Babylon then Rich Dad Poor Dad now here. The concept really makes sense because paying yourself first doesn’t necessarily mean rewarding yourself with an outing after pay day which is part of it but is saying put money away for your short and long term goals in terms of assets building or investing in your growth to be able to create your future slaves. May I always remember this, because when life happens I forget it.
Lesson 4: Buy into products that you are not willing to stop using
This option says If I really like my Mcdonald’s and I don’t want to completely stop buying my Cajun Chicken Meal. I can change my identity and not only be a consumer but also own shares at McD. Meaning when I go buy at McD I enjoy my burger but I also enjoy a cut of everyone else buying a burger at McD as a shareholder through my dividends and capital appreciation. I think this is genius even though it is not always practical because not all the places you like are listed in the stock exchange. But if you are serious you would have to investment in some shares trading knowledge and be patient. Happy learning 😊
Lesson 5: Some writing skills
I also learned some insight into writing, because the main character in this book was an editor at a magazine, they talked a bit about what makes a good article. And that was useful as a new writer. e.g. Not fit too many ideas in an article and developing an idea properly.
Conclusion
Henry a mentor in the book says:” Everyone spends money every day, and as they do they’re building wealth. Everyone builds wealth. The only question is: For whom? “
So let us decide for whom do we want to build wealth for and let our money buy all our dreams.
Questions I asked myself after reading this book:
1. How do I measure wealth, as in what will keep me honest to see if I am on track?
2. What are my values (what matters to me i.e. what do Iwant my money to go towards)?
-Security
– Family
– Adventure
– Making a difference
Sindi Lebewana 