THE BEGINNING OF THE NEXT BILLION SHILLINGS

Recently a few friends met to celebrate my friend, Jack who had achieved  a billion shilling net worth.

The commemoration was called when Jack filling in his personal balance sheet statement, discovered he had crossed the billion shilling mark, in first assets he held and in his net worth, the difference between his assets and liabilities.

It was a small gathering of like minds to celebrate Jack’s milestone, but also as two others in the party had already crossed the psychological barrier, to share experiences on their own journeys.

No notes were taken, below are my recollections from the meeting.

1.       First mindset change, action, then the manifestation

It was in his thirtieth year that he got his revelation. That being rich is not for only a select people with superior genetics or born with a silver spoon in their mouths or in hitting the mythical jackpot. He looks back now and is embarrassed to have labored under this misconception for so long.

The book “Retire Rich, Retire Young” by Robert Kiyosaki was the blinding light that struck him down on his road to Damascus. The enduring lesson from the book he learnt, is that it is not how much you earn but how much you keep and that if you want to be rich or conversely you are poor because of your spending habits.

2.       Start where you are with what you have

He has worked all his adult life. Never been without a job. So his salary is what he had to work with to build his wealth. Following the lead of American investor Warren Buffett he started investing on the Uganda Securities Exchange (USE) with occasional forays into the Kenyan market – Kengen and Safaricom IPOs. Buffet has accumulated his wealth, more than $150b at last count by investing in companies with enduring competitive advantage and holding them forever.

Investor is a daunting word but for as little as sh10,000 one can buy shares on the USE or sh100,000 allows you to buy government bills and bonds. More than half of Jack’s networth is in the stock exchange and bond market.

3.       What is not tracked cannot be improved

Jack has been tracking his balance sheet – record of his assets and liabilities, since 2005. A cursory perusal of it shows from how far he has come. From the modest beginings – in 2005 and five he had sh70 million in assets all said which included his NSSF savings, home and shares, the billion shilling networth seemed far away.

Tracking his number was of immense importance because he could maintain his commitment to shift more and more of his income towards investment and away from consumption. In the period during which he lapsed, his progress stalled and when he got back into tracking his wealth did, as if by magic, his fortunes improved.

What you do not track cannot be improved.

4.       There will be no “Big Deal”

For many of us we are waiting for the “Big deal” and then we will get rich. A cursory look over Jack’s balance sheets shows that if he had waited for that big deal to get rich he would still be living large, with nothing to show for it.

Therein lies the crux of many of our problems that we see improved living standards as the most manifest sign of progress, when it is actually the often unseen accumulation, be it of cash, securities, business or real estate that really makes the difference. When we are engaged in ostentatious consumption people see us and that gives our ego a boost, as opposed to accumulation of assets which is not easily seen by the untrained eye.

Consistent savings with NSSF and building of his share portfolio is what made the difference. Even the appreciation in the value of his home did not grow as fast either over time. As they say consistency beat intensity all the time.

5.       A billion shillings is not all that

Jack did not set out to accumulate a billion shillings. His target is freedom, financial freedom which can underpin all other freedoms. He was commemorating it because it was a recognizable milestone. As he put it, it is like he is on a journey to Entebbe from Kampala and he has only reached clock tower. Not to downgrade the achievement but there are still many potential pitfalls ahead, but at least the road ahead is looking decidedly clear.

He confessed he still runs out of money and does not yet live the way he has dreamed of, but he is on his way and God willing with a few more years, he will surely live the life he has dreamed of.

A final lesson. Jack is not a finance professional so what he achieved was not because of any special skill that he has. He has learnt a lot along the journey, but a lot of what Jack has done is down to financial commonsense: spend less than you earn, save or invest the difference and repeat until rich.

 As one of the billionaires around the table always says, the gap between knowledge and action is what prevents many of us progressing financially.