The Dilemma Between Spending And Saving For Corporate Ugandans.

The Dilemma Between Spending And Saving For Corporate Ugandans.

Pius Atuhaire, (not real) is the head of business development at marketing agency called Market It. He wakes up early so every other day. Pius is so furious about dressing. He is always dressed to kill. Pius makes his way to the well- furnished building that houses their office. They work six days a week from 7am to 9pm.most of the employees here are paid on fixed salary rate. In times of hard economic situations, Pius is always exposed that he can’t sustain the cost of living. The expenditure is overwhelming in comparison to the monthly earning.

For individuals in having white collar jobs especially in Uganda have one characteristic in common; prove themselves. They will spend unnecessarily just for show off. You have probably read stories in the local media of the so called Kampala tycoons. This comes at the expense of personal development.

Why not save?

Every journey starts with a step. I have witnessed hardcore spenders transform into passionate savers by thinking differently and keeping an open mind to the following perspectives; embrace a simple, honest saving philosophy.

Start with tough questions and honest answers to uncover truth about your past and current saving behavior.

You can go through the grind of daily life and still not fully comprehend your motivations behind anything, including money. Ostensibly, it comes down to an inner peace over your situation, an objective review of resources (financial and otherwise), identification of those factors that prevent you from saving more and then creating a plan to improve at a pace that agrees with who you are. A strategy that fits your life and attitude.

The questions you ask yourself should be simple and though- provoking.

Uganda’s saving culture stands at 15% of the total GDP. Why aren’t we saving enough? Perhaps people just don’t find joy in saving. May be they don’t see a reason or a clear direction for the action. Or the interest on savings offered by banks is not attractive. Whatever the reasons, you need to set aside a reasonable amount of your monthly pay the long- term sustainability of your family. Whatever your desires for saving let it be your daughter’s wedding or a child’s education, it must start now.

What is that you want to achieve? It’s not saving forever with no aim. It’s like a soldier in the war shooting aimless with a clear target. Look at saving as a means to move you closer to achieving your intended milestones, something that will bring you and others happiness or relieve financial stress in case of emergencies. A reason, a goal, a purpose for the shillings. Eventually savings are to be spent or invested.

I know of an elderly gentleman in our village who lived like a pauper. It was later discovered upon his death, that he possessed millions just hidden in a small pot in his round grass thatched hut. What’s the joy in that? Did this gentleman have a desire for his efforts?

Living frugally and dying wealthy doesn’t seem to be a thought- out process or at the least an enjoyable one. The messages drummed in your head from financial services are designed to stress you out; they’re based on generating fear end doubt. And fear is a horrible reason to save, joy isn’t.

From an honest and simple philosophy that outlines specific reasons why you need to save or increase savings. Approach it positively, three sentences max to describe your current perspective, why you’re willing to improve (focus on the benefits, the end game) then allow your mind to think freely about how you will fulfill your goals. Don’t listen to others who believe they found a better system. Find your own groove and work it on a regular basis.

Much of what you heard about saving money is false and will lead you down a path of disappointment.

The ‘gurus’ who tell you that paying off your mortgage early is a good idea didn’t generate wealth by saving (or paying off a mortgage early). They made it by investing in their businesses and taking formidable risks to create multiple, lucrative income streams. So before you buy in understand the personal agenda behind the messages. Worn personal finance advice like cutting out a favorite coffee drink and saving Ugx5000 sounds terrific in theory but in the long run, means little to your bottom line. The needle won’t budge. And you’ll feel deprived to boot.

Financial media laments pervasively how you aren’t saving enough. From my experience, this message is not helpful; it fosters a defeatist attitude. People become frustrated, some decide to throw in the towel. They figure the situation is overwhelming and hopeless.

Don’t listen! Well, it’s ok to listen but don’t beat yourself up.

Saving money is personal. Meet with an objective financial adviser and don’t give much relevance to broad- based messages you hear about saving; it’s not one size fits all. Create a personalized saving plan with the end result in mind and be flexible in your approach. Appreciate the opportunity to improve at your own pace, to reach the destination for each path you create. Just the fact you’re saving money is important. The action itself is the greatest hurdle. Strive to save an additional of 1% each year; it can make a difference. If not for your bank account, for your confidence.

Compound interest is a cool story, but that’s about it. Albert Einstein is credited with saying ‘compound interest is the eighth wonder of the world.’ Well, that is not the entire quote. Here is the rest: ‘he who understands it, earns it; he who doesn’t pays it.’

I am not going to argue the brilliance of Einstein although I think when it comes down to today’s interest- rate environment he would be quite skeptical (and he was known for his skepticism) of the real- world application of his ‘wonder.’

First, Mr. Einstein must have been considering an interest rate with enough ‘fire power’ to make a dent in your account balance. Over the last six years, short- term interest rates have remained at close to zero, long term rates are deep below historical averages and are expected to remain that way for some time.

Certainly compounding can occur as long as the rate of reinvestment is greater than zero, but there’s nothing magical about the ‘snowballing’ effect of compounding in today’s environment.

Also, compounding is most effective when there’s little chance of principal loss. It’s a linear- wealth building perspective that no longer has the same effectiveness considering two devastating stock market collapses which have inflicted long- term damage on household wealth. What good is compounding when the foundation of what I invested in is crumbling?