Spendthrift or tightwad? Tame expenses and see the difference

The article “Follow Your Dreams With Action to Create Wealth” highlighted the need to take action and endure in translating ideas into tangible wealth.

This requires a significant amount of time investment in planning household finances to save approximately 15 per cent of your pretax income for investment.

In “Time, Energy and Money is Key to Translating Ideas into Action”, we discussed the inverse relationship between the amount of time spent purchasing luxury items and the time spent planning finances; that accumulators of wealth allocate nearly twice the number of hours to planning their financial investments.

On the contrary, under-accumulators of wealth in the same income group do not believe in spending time planning their finances. They spent quite a chunk of time identifying luxury items and allocate twice as much of their income towards buying them.

The first message here is that one must go beyond intentions and take specific actions to tame expenses while increasing the amount of disposable income invested to expand material wealth. That developing goals is not necessarily the same as commitment to achieving them. A myriad of situations distract the commitment to take action.

For married couples, for example, have may you noticed that your spouse’s orientation towards thrift and investing or consumption spending is a significant factor in the household’s wealth position.

Both couples could be spenders or just one discordant spender and the other a keen allocator of money. The partner who was brought up by frugal and thrift-oriented parents will be the “tightwad” of the household’s financial discipline. They consult each other regarding expenditure and also spend time looking for discounts, for example when buying clothes. Yet they do not compromise quality.

On the contrary, where couples have no centralised control over their expenditure, a spending drama ensues. Each partner runs rogue, spending the family income. They neither plan nor consult each other on expenditure and neither knows what the other is buying or how much they are spending. For this reason, I recommend pre-marital financial counselling.

Secondly, wealth accumulation is not an aspect of the level of household income. You will notice that your high school classmates who started investing early have created more wealth than high-earning professionals who arrived late. Who between the two of you worries about the standard of living?

— Patrick Wameyo is a financial literacy educator and coach. Email: [email protected]