Ok. Let me get the facts straight. We had dinner last night in China Palace (Mall of Asia). We had the place to ourselves. I was with Shirley and our girls (Bea, Ana and Andrea). My Mom and Dad joined us together with TinTin (my sister) and her son Nathan and her fiancé Gary. Then on the other table near us was a familiar face. A simply dressed old man sitting on his wheelchair eating together with some family and friends. I noticed him staring in our direction while we were eating, so after I finished my meal I mustered some boldness to approach and greet him. I just introduced myself and said it was an honor meeting him. He introduced himself and smiled and I asked permission to take a picture with him which he obliged. That’s the whole story. Of course, I wanted to ask if he can be a sponsor to my daughter’s very distant future wedding. (just kidding)
Here is an example of a man who slowly built his wealth for many years. A legendary rags-to-riches taipan and a shopping mall pioneer. He is now considered the richest man in the Philippines owning over 30 malls (and counting) a top bank and a lot of real estate. Most of us know his story of humble beginnings, driven by a strong vision and stern discipline and frugality. He is a first generation millionaire (now billionaire) and has now passed the business empire to his children.
There was a TV show in the early nineties entitled “Lifestyles of the Rich and Famous” hosted by Robin Leach. It featured the extravagant lifestyles of affluent athletes, business tycoons and celebrities. It shows you some of the properties of these wealthy people i.e. mansions, resort and vacation houses, private islands, huge yachts, jets, sports cars, fine jewelries, etc.. I have no objection in buying “stuff” as long as you don’t find your identity in having them. Things don’t define the man, they are merely tools to fulfill his purpose and calling in life. If you feel you that you need 7 cars/ SUVs to get you from point A to point B, it’s up to you. The question is “Can you really afford it?” (aside from “Do you really need it?”)
Many people who are high-income earners may not end up to be rich because of the high lifestyle that they maintain. They fail to accumulate any lasting wealth. They are more concerned of the image that they have and continue to buy the symbols of the rich: $$$. Even the middle class people are not spared of this financial trap. They live hyper-consumer lifestyles that they spend their money faster than they earn it. They even incur a huge amount of debt and end up paying for it their entire life.
Prov. 13:7 One man pretends to be rich, yet has nothing; another pretends to be poor, yet has great wealth.
On the other hand, in the book Millionaire Next Door, the authors Stanley and Danko, made a study of America’s decamillionaires (net worth above $10MM) and have found some interesting facts common to them.
Most of these millionaires are first generation millionaires, which means that they did not inherit their wealth but have accumulated it through saving and investing.
They live well below their means (which means that income is greater than their expenses). They budget and plan their expenses. They practice the “pay yourself” or set aside approach i.e. taking 10-15% of earnings and set aside as “untouchable” for personal spending.
They believe that financial independence is more important than displaying a high social status. In other words, they don’t care about image. Many of them don’t own flashy sports cars. They drive pick up trucks and keep them for years. Some even buy used cars. They don’t buy expensive watches or jewelries. Many of them don’t buy signature brands of clothing like Armani suits or Prada bags. They go to regular department stores to buy what they need.
They are frugal. Instead of looking for things to buy, they look for opportunities to invest their money in. They believe that the more time someone spends buying things that “look good,” the less time they spend on planning their personal finance.
These are some of the things that the authors found common among the millionaires that they surveyed.
I am not saying that we live like a pauper. We can live comfortably and moderately and at the same time be aggressive in saving and investing. You need to find your balance. I have no problem in buying signature items (I own a pair of Chuck Taylors!). Make sure it’s part of your budget which is written down.
I realize that there are no shortcuts in building wealth. We all have a chance to accumulate money and have a nice and comfortable retirement. Don’t just live for the moment. Live with the future in mind.
Do you want to look rich or be rich?
A lot of people are dreaming to be rich or may I say financially independent. But many don’t have the discipline to work and save and see their money grow. They are impatient and would like to get rich quick. They would rather enjoy life now and spend what they have rather than delay their gratification and save up for a better future. Because of the desire to get rich quick, they engage in questionable investment schemes, highly speculative stocks and even buy lotto tickets or join a game show. Unless you are a Hollywood celebrity who will earn millions of dollars after doing a movie or a business tycoon who earns thousands of dollars a day or marry a rich person or win the lottery (you may add to the list), the rest of us will have to work, save and invest for our retirement funds and other needs.
Is it possible for a person to end up with millions for retirement even if he is just a regular employee like a call center agent, sales associate, bank employee or anybody who is earning a meager income? I believe the answer is “YES!”
It starts with having the right mindset. Most people have a mindset of consumerism. They live for the present. They spend ALL their hard-earned bucks for things that do not have lasting value i.e. shoes, clothes, the latest iPhone or gadget, a new car, frequent dine-outs (date nights with wife is fine, of course!), an exotic vacation, etc.
While I can always find the justification for such expenses, the real questions are “Do I need it?” and “Do I have the budget for it?” Don’t get me wrong. I’m not leaving faith out of the equation. I am merely pointing out an irresponsible and oftentimes presumptuous approach to finances and spending.
We have to change our perspective from short-term to long-term thinking. As my friend Chinkee said, “The poor thinks daily in terms of making both ends meet. The middle class thinks in monthly terms. Whereas the rich thinks in annual cycles or even decades when it comes to investments.”
In other words, the longer the term of perspective, the better the decision-making.
When my daughter Bea was around 8 years old, we brought her to Toy Kingdom. When we entered the store, I gave her P100 and told her, “You can buy anything you want with your money (which was not much) today or you can wait another time and I’ll double your money so you can buy a better toy.” She was excited as she walked in to the huge store with millions of pesos worth of inventory. Guess what she did. She decided to use the money to buy stationeries and other small items, which did not last a day.
She saw an opportunity to buy but failed to see the other opportunity of doubling her money if she just waited. Just like her, all of us are exposed into the world where billions of products are for sale. There are so many choices to make. But instead of waiting for a better opportune time, most of us decide to go for the kill and buy what we want even if we can’t afford it. Some even spend tomorrow’s income today by buying on credit installments or mortgages. You have already committed future income payments for the item that you buy today. People want to look rich instead of really being rich. Huge difference.
Prov. 13:7 One man pretends to be rich, yet has nothing; another pretends to be poor, yet has great wealth.
Again, the longer the term of perspective, the better the decision-making.
More on this topic in my next blogs . . . .
After preaching in the morning service, I bought a short hot latte from Starbucks. While sipping and enjoying the hot latte in my office, I remembered a principle I read in the book entitled “Automatic Millionaire”. It’s the principle of the latte factor.
According to author and financial consultant David Bach,
“The Latte Factor® is based on the simple idea that all you need to do to finish rich is to look at the small things you spend your money on every day and see whether you could redirect that spending to yourself. Putting aside as little as a few dollars a day for your future rather than spending it on little purchases such as lattes, fancy coffees, bottled water, fast food, magazines and so on, can really make a difference between accumulating wealth and living paycheck to paycheck.”
In other words the “Latte Factor” is the unnecessary “little” expenditures that can drain our hard-earned money without realizing that they can add up to a huge amount. It’s the little foxes that destroy the vine. It’s a small stone that killed Goliath. If we are not conscious of our spending, chances are there are a lot of little wastages that occur with our money which can be redirected to a savings fund.
I remember when Starbucks newly opened, there was a week when I spent P1,000 worth of coffee. Now that’s about 9-10 cups of coffee but if I continue doing that, it will amount to P52,000 a year. That’s a potentially good savings if put in a sound investment portfolio or mutual fund. I decided to cut down on my coffee purchase. Please don’t get me wrong. I’m not against buying Starbucks coffee. In fact, I love it! What I am saying is to identify your latte factor (whether donuts, chocolates, soda, clothes, shoes, etc.) and start working on it in your savings.
An important principle to bear in mind is:
The best way to save is to spend less than you earn over a long period of time.
The problem is not how much we earn. . .it’s how much we spend! Most of us are natural born consumers.
Many times, people who receive an increase in income still cannot save because there are always things that they think they need when the increase comes. If we don’t radically change our mindset on handling finances, we’ll always be living from paycheck to paycheck.
Prov. 13:11 Dishonest money dwindles away, but he who gathers money little by little makes it grow.
LET’S DRINK TO THAT!
Prov. 3:9 Honor the LORD with your wealth, with the firstfruits of all your crops;
Prov. 3:10 then your barns will be filled to overflowing, and your vats will brim over with new wine.
Contrary to a religious mindset that money is intrinsically evil, we can honor God through our wealth. Maybe, the first thing that comes to mind when we talk about this is tithing. We definitely honor the Lord when we give the tithe or 10% because it is a reminder that everything comes from Him. Giving it is a way of saying to God – thank you and an acknowledgment that He is the source. He does not need it. But the tithe is His anyway. We are merely returning what belongs to Him.
But guess what, it is not only the tithe that is His. The whole amount of our wealth is His.
Psa. 24:1 The earth is the LORD’S, and everything in it, the world, and all who live in it;
The money in your bank account is not yours but God’s. Your house, your car, your clothes, your computer, everything that you own is really owned by God. He owns everything. God owns the cattle on a thousand hills and yet He doesn’t eat burger. He does not need it. Yet He owns it.
What this is saying now is not only is our giving honoring to God but how we steward our wealth should be honoring to God.
God does not just look at our giving but even our spending, saving, investing, etc. We are not owners. We are stewards. God is the title deed holder.
Every time God gives us income, we have five uses for it.
– Support a lifestyle
– Debt repayment
– Savings and investment
Three of the five uses are consumptive (tax, living expenses and debt) which means that money you use is gone or consumed. Only two uses are productive in nature (namely tithing and saving) which means that the money you use here grows exponentially. Savings earns through compounding interest whereas tithing is a seed that multiplies in the supernatural realm and will come back as a great harvest in the future.
God always looks at the whole pie and not just the 10% that we give Him.
First question, “Are we honoring God through our giving?”
Next question, “Are we honoring God in handling the remaining amount?”
More of these in my next blogs.