Friday, 21 October 2016

Moneywise 20: You must know the state of your health


By on 11:30
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A Nigerian Woman Checking her health status during a free health service campaign by Honorable Lukman Oyewole Lawal (LOL)


I must confess that being a part of my Mentor’s discussion with Dele was a great blessing to me. By being a mere observer I learnt more on how to really take charge of personal financial affairs, especially from the mistakes Dele made, you cannot get these wisdom nuggets even in Harvard Business School.

My Mentor placed a call to me in the evening to intimate me of his decision to change the venue of our meeting to Dele’s residence, located somewhere off Kilburn High Road, a few houses from the Kilburn tube station. I am quite familiar with the neighborhood for that was where a newspaper I had worked for had its London office and I had been stationed there for some time.

I got to Dele’s house at about 9 a.m. and found him already waiting for us. I was admiring his sitting room when the door bell rang. As we had expected, it was my Mentor. We were both happy to see him as Dele had also come to the conclusion that the opportunity to listen to him talk on money could not be traded for anything.
Dele served us with some fresh orange juice and my Mentor took over from there. “Can you conduct us round your house?” he requested from Dele. “Sure”, Dele replied.


Big bang home with no single book
Dele’s home is a big duplex built with beauty and elegance with twin garages. We started from the sitting room. There were three big screens Sony television sets—home Theatres, placed in different corners. There were two sets of Sony Music centers as well. The sitting room is beautiful, I must admit. Dele explained that the multiple Home Theatres were to ensure that visitors could sit anywhere and watch any programme.
“When a bank advertises that it wants to assist you to buy television, chairs, refrigerators, and the like, and you jump at the offer, it is a sign that you don ‘t have financial intelligence. The question I expect you to ask anytime you buy an item is: ‘Will this bring money into my pocket?’ If you cannot answer in the affirmative, you should walk away, from the transaction unless it is essential. Borrowing money to acquire liabilities can only lead you to multiple financial crises and frustration”
My Mentor did not utter a word. But I noticed that he was shaking his head at regular intervals as Dele conducted us round his house. There were six rooms altogether. He indicated his interest in a room that was locked and Dele was able to locate the key. It happened to be the room where he kept all the toys he had bought for his children. The toys were carefully arranged with no space left to take anything. I must confess that I was not familiar with most of the toys there. Some were in the mould of mini aero planes, jeeps and cars of different sizes. Dele said his children loved the toys. Each of the rooms had a television set. My Mentor still said nothing. I could sense that Dele was uncomfortable with his silence. He eventually spoke as he asked Dele to lead us to his study.
Dele was lost. “Study?” he asked in amazement. “There is no time to read here sir”. My Mentor requested that we returned to the sitting room.
We all sat down around Dele’s dining table. I could see an expression of concern on my Mentor’s face. He cleared his throat about three times before he started to speak.
“Gentlemen, the problem on our hands is more serious than I thought. Our friend needs to be saved from himself. Now, let me ask a few questions before I make my observations known. Did you pay cash for the three Home Theatres?”
 “On credit sir”, Dele replied. “What of the three cars in the garages?” “On credit as well” Dele responded. “What about this beautiful house?” my Mentor continued. “It is on mortgage. I am to repay in the next twenty years”, Dele stuttered. “And the toys”,  my Mentor pursued with the doggedness of a prosecuting lawyer, “what are you going to do with them since your children are no longer using them?” Dele stared at the ground. “Actually, I have not thought about what to do with them,” he mumbled.

“I am deeply concerned for you Dele”, my Mentor said. “As I said, you need to be rescued from yourself. What I have seen all the way, in the rooms, in the compound, in the sitting room are signs of acute financial illiteracy that need to be tackled without delay. You have spent thousands of pounds to buy Home Theatres, yet I could not see at least one book on money or personal finance anywhere in your house. Show me the books you are reading and I can predict where you are headed. You are made by what you read and the people you meet”.

“I can trace every problem I have noticed here to your failure to sharpen your financial intelligence. How much money are the Home Theatres bringing to your pockets every month? How much are you generating from the toys you have stored in the room and from the cars you have parked in your garages? Of course, you know they are the ones drawing money out of your pocket.
If you have read even the most elementary books on personal finance, you would have learnt that your salvation lies in understanding the difference between an accountant’s definition of assets and liabilities and the definition of the same terms by rich people”.

“For instance, if I ask you to classify your Home Theatres, I am very certain that they would end in your asset column. And that is how an accountant would classify them. But that is misleading. An informed millionaire would classify the same items as liabilities. You can only consider an item an asset if it brings money to your pocket that you can spend or save. Once it is the item that is drawing money out of your pocket, either for maintenance or servicing, it makes sense to classify such items as liabilities. But don’t get me wrong, the Home Theatres are assets to the company that sold them to you on credit. Every time you make your monthly payment to the company, the company is smiling to the bank, but you cannot do that”.
“If you have also read any good book on personal finance, you would have discovered the folly of borrowing money to buy consumer items like your Home Theatres. It is a sign of sharp financial intelligence to borrow to buy assets that can generate cash. It is from the proceeds of the items you bought that you should be repaying the interest, with enough still left over to take care of other things.
When a bank advertises that it wants to assist you to buy television, chairs, refrigerators, and the like, and you jump at the offer, it is a sign that you don ‘t have financial intelligence. The question I expect you to ask anytime you buy an item is: ‘Will this bring money into my pocket?’ If you cannot answer in the affirmative, you should walk away, from the transaction unless it is essential. Borrowing money to acquire liabilities can only lead you to multiple financial crises and frustration”.

“All the items you have bought can be destroyed, but the knowledge you have gained through insightful reading, cannot be removed, it is permanent. You have built your financial foundation on sand and it is just a matter of time before it collapses. You cannot expect to achieve personal financial freedom by accumulating bad debts upon bad debts, liabilities upon liabilities, You have to liberate yourself urgently” He paused.
(Excerpts from the book: “THE MILLIONAIRES CAPSULES” by AYO AROWOLO. Read “You can start all over again” tomorrow on this blog)
Ayo Arowolo, Publisher The Millionaires' Capsules

Gbenga Dan Asabe

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