Wednesday, November 11, 2009

Making the Right Decisions (Being Business Smart)

“Who Wants to be a Millionaire?” Who could ever really say no to that? Everyone wants to be rich, whether for personal gain or otherwise we all like the thought of having a bit of money piled up in our bank accounts.

However, many do not know or understand the basic principles it really takes to obtain riches.

Becoming rich or for those who want more, wealthy, is a nice thought, but do you really have the discipline to endure the sacrifice it is going to take to get to that goal? Before you think about how you want to come across many riches, ask yourself if you are ready for the many hardships and struggles that will come and is needed before you begin seeing a single cent.

The wonders of cable television have led most to believe that riches is denoted by flashy jewelry, fast cars, or popping champagne bottles in the club all weekend, and it exemplifies this through music videos (not rap music but all music). Ladies and gents sadly I am hear to announce that this is an illusion, if anything that depiction is the complete opposite of what “rich” really is or how it is acquired.

With that being said, there are a few basic principles that most, if not all, follow in order to obtain riches, and it all begins with Making the Right Decisions.

Firstly…sacrifice. This is the step that most fail at, simply because of the inability to give up the lifestyle one currently indulges in. Ironically, ones lifestyle has to become less than it is now in order for it to become better in the future. You have to spend less than you are now and enjoy less of the things you are use to. “Pour example” (for example), less groceries at the supermarket; no more Friday night hangouts with your friends that require you to spend unnecessarily; fewer or no night outs at the clubs; no more indulging at lunch time at that fancy restaurant you love so much. Now it’s homemade sandwiches and leftover dinners for you. Basically, the point is you must now move from a life of want to a life of need, only spend on absolute necessities. If your clothes aren’t torn there is no need for new ones (same goes for the shoes ladies).

Just so you know: if you are unable to apply this first principle then it’s pretty much pointless to read on. Discipline is key in obtaining any form of riches or anything good in life for that matter. Whether on a level of content or ultimate satisfaction, just ask the many who already have it and you’ll see, what it began with is sacrifice and discipline.

With the extra money now available at your disposal this is where you must now take that money and turn it into savings. It is important to note you will not see the extra money if you minimize spending on one aspect of your life and maintain or increase on another. The sacrifice has to be right throughout, not taking up new expenses, and effort must be made to distinguish that money as money to be saved ONLY, and not spent, not even for necessities. “It’s okay, we don’t need the loaf of bread this week, we still have some crackers left over” (sacrifice and save).

The next principle is investing, and investing wisely. People Lotto is not investing nor is any get-rich-quick scheme. Investing entails an advised business decision (like owning your own business) where the risks are calculated. Meaning, that there is a strategic plan, research has been done on the business’ feasibility and market, and the right people included, ensuring the greatest possible chance for success. In a sense, not foolishly throwing money away without knowing in greatest detail what you are getting into.

You should also develop the habit of investing small and aiming for big returns. Just because you have the money to invest doesn’t mean you should throw it all away in one investment. Try your hand at one thing with as little capital as is needed. That way even if the business fails you won’t be left in a state of bankruptcy, but still have enough to survive for a few more months, and some to invest in another venture that may work for you. Common business principle: spend the least and expect the most.

Now here’s the final and trickiest part. Once the business or your investment starts booming what is the first thing most people will do? Go out shopping, spending elaborately on latest cars, clothes, house and any other expense that is completely useless and completely unnecessary.

A wise businessman/woman knows the importance of ‘turning over’ profit. This means taking the excess money that has been made from your business and putting it back into the business or in another investment to ensure that there is a consistent flow of money coming in and out of your business (cash flow). Then once this has been done, taking that increased profit ‘turning’ some of it again and saving some as your accumulated ‘wealth’, so to speak.

It can be further explained in a model I came up with called the ‘Saving to Spending Ratio (SSR)’, but that’s for another day. It basically explains that an increase in money earned, can allow you to slowly amass wealth by maintaining your current lifestyle or spending habits even as your bank account grows. It is a principle that can be applied even to employees who may have gotten a promotion or an increase in salary, where the spending habits remain the same even though there is a salary increase.

There are greater depths to business and business principles that one needs to know in order to become greatly successful and wealthy, but with those outlined above at least you will be on your way to realizing the dream of those millions. However, be aware that money doesn’t equal happiness, it’s simply a means to make life a bit easier to live.

By the way, did I mention those annoying rainy days?

All the Best.

1 comment:

  1. Mr Henderson thank you for this important posting. Well written, hoping each and everyone will sit down read and reflect on this. Discipline and sacrifice goes hand in hand. It is unfortunate that many of us came from homes whereas our parents did not teach us the basic principle of savings. And this is still taking place in our community today. Too many seniors from the community believe their children are their old age pension. Putting added pressure on children that already stressed who are now struggling to make it with their small family. So I beg! Due to the fact that this has been and still is a generation curse. Let us now break it by ensuring we are not going to burden our children with the notion that they are our old age pension. Ladies/gentlemen going out everything weekend buying the expensive outfits for one night (we can always find something that has been sitting in our closet not worn that we can be creative with), the weekly/bi-weekly visit to the nail shop (which those acrylic nail only do but damage our nail) start again by buying your nail polish & remover and change as often as you like, there is no cost to you. Let us quit this thing of buying our children all these name brand shoe and clothes (these names have already made it and we are only making them richer). Let us concentrate on financial investing and educational investing with our children, while teaching them on how to invest by the mere fact of the allowance that they are given. I agree also that lottery is not the thing, if each of us were to check on how much we have invested in lotteries over the years. We probably have spent hundred of thousands. Let us break the welfare mentality that has captured us and consider ourselves rich, thus! beginning that cycle today. We all need to leave a legacy.

    Carol Boeth