Tuesday, March 19, 2024

PERPETUATING POVERTY AMONG OUR ELITE

At the end of last month a video went out showing a convoy of high end 4WDs cars ferrying the final year students of a secondary school to their prom.

The young men, who probably harangued their parents to hire the cars may be excused, we all know how it was to try and impress the ladies at that age, but you have to wonder about their parents and school administration for allowing this to happen.

I will never forget a few years ago seeing one of our friends shelling out sh300,000 for a pair of Timberland boots for her small brother to wear at his final year social, and thinking she was absolutely mad to be paying the equivalent of his school fees for a few hours of flossing.

Inflation has clearly set in, because I can imagine in addition to multimillion shilling outfit, parents now have to hire 4WDs and limousines for the boys to wow their female counter parts.

It makes me laugh to think that we used to be ferried in the school truck for socials. Alighting with all the dignity one could muster from the back of the truck, must have been a very funny sight. Bless the ladies of those days, they could see beyond that to the potential of their boyfriends.

"These same kids will grow up to be tone deaf MPs and thieving officials wherever they work. They have been set up for a life that they cannot afford to maintain through hard and diligent work...

It is no wonder then that one big shot on social media last week declared that to be rich in Uganda you need to have a net worth of $1.1m (sh4.98b), live in a house valued at at least sh500m, own two sh120m cars and have your kids in schools that charge at least sh5m. What he described was high living and not necessarily wealth.

And that is the thing, we think wealth is most manifest by our spending habits. So these young men are unwittingly being sold the idea that you need to look rich to be rich, which is far from the truth.

It has been shown that wealth depends more on your discipline with money than how much you earn.

There is the urban legend of the manager who cannot make his salary stretch to the end of the month, while his driver, who earns a fraction of his salary, not only gets to the end of the month but has enough left over to invest in his growing empire of mizigo rentals.

The difference between the two men is that the boss is focused on a consumption lifestyle while the driver is focused on investing.

And that is the crux of the matter. There are only two ways to spend your money, you either “eat” it or invest it. In the former case you look rich even while living hand to mouth, while in the latter case you may not look rich today, but you will be building wealth, which may very well lead to a higher standard of living in the future.

A friend of mine has been investing diligently for the last 15 years. He has maintained his expenses as a proportion of his income, to about 30 percent. So while ten years ago his expenses may not have been much to write home about, his expenses now have grown to almost sh5million a month. The remaining 70 percent he reinvests, increasing his income annually in the process.

His mantra is he would rather be rich than look rich.

"I believe our lack of understanding of how to create wealth is why our political leaders jump at any opportunity to dip their grubby fingers in the public till and our company officials do the same....

They think that building wealth comes from grabbing. Being men and women of above average intelligence they soon realise that in order to sustain their high consumption living they need to grab more and more. Which explains their bottomless greed. Hence their need to stay in government. There are enough former public officials walking around shell shocked, wondering where all their money went, because they do not have access to the treasury.

The trick with money is that if it is left seating around it will diminish with time. A function of inflation. And if our brains are wired towards consumption rather than investment, there is no money that cannot be finished.

The lessons our children should be learning are, how to earn money through hard, honest work, to live below their means, saving the surplus and then how to make that money work for them through investment. The biggest lesson of this process would then be that it takes time to create wealth.

Coming full circle to the young men and ladies at the aforementioned prom. By enabling this ostentatious display of wealth, our parents and schools are sending the wrong signals to their young wards, that pretending to be rich makes you rich...

In trying to keep up with these artificial standards these young men and women will not be averse to reaping where they did not sow when the opportunity presents itself.


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