LESSONS FROM SHEILA GASHUMBA

Last week it was reported that Kampala socialite, Sheila Gashumba had thrown a private party to celebrate the acquisition of her Range Rover.

While the doyenne of Kampala’s socialites, Bad Black claimed the 2022 car cost sh700m, a cursory look over the internet suggests that sh300m is more a realistic figure.

As expected such ostentatious displays of wealth by someone so young – Sheila is not yet 30, had tongues wagging, with the haters leading the pack.

We shall take her father, Frank Gashumba’s word for it, the she has worked hard to buy herself such a car, but this column would like to glean a few lessons from this recent episode of “Our City, Kampala”.

First of all, you have to give it to her, that Sheila’s working endeavors pay her enough that she can buy such a car.

We would however caution other young girls against following in Sheila’s footsteps.

A wealthier man once said “Money is not for eating but for making more money”. In a roundabout way he was talking about opportunity cost. For every use of money, you have foregone another. There are only two ways to spend money, you either eat it or keep it.

If you eat it, there will be some transient pleasure that will soon be forgotten, but if you keep it, invest it, you can build wealth, where your money works for you and you will one day not need to work. This is important for Sheila whose chosen profession – Club Hostess, has a short lifespan.

Like a professional sports person, she has five to ten years to maximize her income, investing most of it for the long life ahead when she will no longer be the flavor of the month. Because as they say, the beautiful ones are not yet born.

Former undisputed boxing heavy weight champion, Mike Tyson once was paid $20m for a fight in the 1990s, but was recently tittering on the edge of bankruptcy. It’s not difficult to see why. During his career, while he made millions, he blew away millions in high living, as if his income would last into perpetuity.

Subsequent champions from Floyd Mayweather to Anthony Joshua, have learnt from his downfall, investing their monies in real estate and business, ensuring that they families may never need, for generations to come.

While it takes years of pain, blood and sweat to become a champion and earn those millions, it is even harder to keep them and grow them.

Just for illustration, Sheila’s Range Rover is depreciating by the day, losing value. Chances are she will have to sell it for less than she bought it. In addition she has added fuel and maintenance bills that will at best swallow more and more of her hard earned cash or force her to work harder to sustain the beast. While she is the toast of the town, she has actually dug a deeper hole for herself.

But imagine she had taken those hundreds of millions – let us work with sh300m and fixed it at her bank for say 10 percent a year, it would earn her sh30m annually or sh2.5m a month, which we dare say would cover her rent in a suitably upmarket apartment.

Or she could have gone and bought a treasury bond that would give her double digit interest of between 12 to 19 percent or sh36m to sh57m a year for up to 20 years to come.

Or if she had bought Stanbic shares at sh50 each before 21 October, she would now own six million shares in Uganda’s leading bank and on 22 November would receive about sh14m as her dividend from the bank – just in time for Christmas. And did we mention that Stanbic has got into the habit of paying dividends twice a year?

Or if she went out and bought a three bedroom apartment in any of our suburbs, she would have saved herself the hustle of dealing with landlords, owned a piece of fast appreciating property for as long as it served her purpose.

We can go on and on and on. The point is, that its not what we earn that makes us wealthy but how much we keep of what we earn.

Most normal working people’s earning power peaks in their 40s and 50s, for Gashumba that would be sooner and hence the need for her to be more aggressive in keeping more of what she earns than consuming it.  

But consumption is fun, it is good for the ego, so no wonder when we get money the first thing we think about is how to eat it.

But here is another fact, according to the World Economic Forum (WEF) 10 percent of the world’s population own 76 percent of the world’s wealth. I think in Uganda that figure maybe a bit more skewed, like 10 percent own 90 percent of the country’s wealth.

The genuinely wealth have become so by accumulation not by consumption.  

So the lesson from Gashumba really is, how not to spend your money, if you want to be financial free in your lifetime (of course when you are dead you are financially free).

She is still young and probably hitting her peak earning years in the next few years, she can still improve her financial position for the long term.

But I really would not count on it, if only because it is easier to eat your money now, than build assets that will guarantee you and children income well into the future.