PERSONAL FINANCE: Unleash your inner billionaire

Do you know that you are already a billionaire? Yes! In the entirety of your working life you will make between 100 million to a billion shillings. Let that sink in for a minute.

Now, if you were certain about that, what choices would you make? If you do a forecast of all the personal income you will make from your salary or business, you will get close to those numbers.

Companies always do forecasts. They project what they want to be earning, what they want to be spending and what they want to be worth. Why shouldn’t you do the same?

Let’s take Sylvia, a young graduate who starts working at the average age of 25and works until retirement at 60. Let’s give her a starting salary of Sh30, 000 and increase it by 10 to 20 per cent every year.

If all factors remain constant, she will earn Sh430 million in the next 35 years. That’s almost half a billion shillings. There are some people who start off by earning Sh70, 000 on their first job. They will earn over a billion shillings in their working life.

So let’s throw out the notion that we will never earn millions of shillings. From the day you start working, chances are that you will earn multi-millions or billions.

What you have to ask is how much of it will show up at the end. If, at the end of life on earth, you had to give an account of what you did with the financial resources you earned, what would we see?

If we deduct tax, Sylvia still would have over Sh300 million to account for. She will probably say she spent another Sh62 million on rent. This is about 20 per cent of her earnings.

If you knew in advance that you would spend Sh62 million on rent, what would you do different? Maybe you would not be so quick to move to a more expensive house once you get a raise.

Maybe you would start working on a plan to buy or build your own house with that Sh62 million. Maybe you would simply purpose to invest more than you pay in rent.

Let’s talk about entertainment. Are you happy paying the same amount on entertainment? I have sat with people who have admitted to me that they spend even up to one million shillings in the bar per year (Sh3,000 per day).

Apart from the damage to your health and even the relationships with family that you are missing out on, imagine what you feel when you have to account for it at the end?

Will you be happy knowing you drunk that amount of money but you were not able to take your child to university? You always hid behind the excuse that certain universities were too expensive.

So the bar became a bigger beneficiary of your money than your child? You may also realise that you never got to do the things you really valued. If Sylvia buys lunch every day for her entire working life she

will spend over Sh15 million shillings.  Would you have preferred to travel the world instead of buying lunch every day?

Let’s also talk about savings. We have such a bad savings culture in our country that even if Sylvia manages to save and invest 10 per cent she will be among the few that do. Do you think though she will be content to realise she only made Sh40 million shillings work for her?

The amounts we have been talking about happen over time. We also need to think about what the equivalent of that amount is now. One shilling, 10 years from now will not have the same value as one shilling today does.

Let’s say that Sylvia’s employer is willing to give her a one-off amount and then they never have to pay her again for 35 years. She will not receive Sh430 million because that is earned over time.

The equivalent in today’s money is actually closer to Sh15 million. If you had Sh15 million today and invested it for 10 years you would end up with Sylvia’s amount in 35 years.

So Sylvia’s employer is valuing her future (based on current information about her) and pricing it at Sh15 million. Would you trade your future earnings for a similar amount? You are already doing it if you don’t consciously start planning to push the boundaries on what you can earn.

Most people are doing the same thing at work, displaying the same attitude and expecting miracles to happen when salary reviews are done. If Sylvia does not believe her potential is only worth Sh15 million shillings she needs to proactively work towards

developing herself, meeting targets, bringing her best to work, etc., so that her earning potential increases. This way, her value even today would be higher. She should also start making her savings work for her.

Look at your finances the same way an organisation would. Forecast for the longterm so that you can truly make the decisions that would have an impact in the next five or even 10 years. Decide who you are going to spend your hard-earned billions on over time. Work towards the income you want to be receiving.