Life is Good

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 showed 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 to buy 7 cars/ SUVs to get you from point A to point B, its 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 hyperconsumer 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.

1. Most of these millionaires are first generation millionaires, which means that they did not inherit their wealth but they accumulated it through saving and investing.
2. They live well below their means (where income is greater than 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.
3. 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.
4. 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 comfortable 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 its part of your budget which is  written plan.

I realized 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?

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 . . . .