Lack of FINANCIAL WISDOM on the part of most people is the root cause of poverty in Ghana. You do not need your uncle, brother, or the government to give you some money in order to become rich but all you need is financial wisdom. Ghana does not need foreign aid to make the country rich but she needs financial wisdom. If USA, Japan and UK are wealthy nations, and if some Ghanaians are also genuinely wealthy, then we need to find out the reasons why they are wealthy and simply practise what the wealthy people practise as simple as A B C.
What is FINANCIAL WISDOM?
Financial Wisdom is simply your ability to use the mind which is the greatest resource to apply some principles and values such as “pay yourself first” (save first), Honesty, Creativity, Positive Thinking, Hardworking, Frugality, Self Reliance and Entrepreneurship to create wealth and pass it on to your descendants. Academic knowledge or financial knowledge alone cannot make you wealthy. You need to apply your knowledge on the abundant resources that God has created around you and turn it into something that works for the good of the society. God would then say to you, “Oh good and faithful servant, thank you for using the creative power I invested in you to create a vehicle that will help human beings to travel and to do my work. Good servant continue to be rich and live a happy life. Do not worry about unemployment or hunger. Pay your tithes and be charitable to the poor etc. etc.etc” This is why Billl Gates, Henery Ford and others continue to be a blessing to the rest of the world. Fellow Ghanains please do not waist your time just to blame others for your failure. God wants you to create wealth from the scratch and be a master of your own destiny.Due to linited space, this article will concentrate on SAVINGS as an important aspect of FINANCIAL WISDOM. For creativity and wealth creation, read the previous article.
The Secret of Pay Yourself First
Think about this,
"Rome was not built in a day"
Perhaps the best way to create wealth from the scratch is to practice the concept of "pay yourself first". Whenever the rich earns some income or makes some money, he pays himself first before he spends the rest. He does not say,
"Oh! this is just a little amount of money so let me spend all". It makes no sense to a smart person to go to work everyday to make money just to pay expenses such as rent, electricity and so forth. When I was a student, I learnt from my economics tutor that,
Income – Consumption = Savings
This is a Poverty Creation Concept
This simply means when you earn some income, take all your expenses first before making savings. This is exactly what most people do but the temptation is that they end up spending every penny and leaving nothing for savings. Most people always spend all their income and tend to have the simple excuse that there was nothing left to save after paying all expenses. The author sees this as a poverty concept because it makes the followers poor. When you make $1000, $3000 or 2,000,000 Cedis (Ghana currency), you will always have the following results.
$1000— $1000 = 0
$3000—$3000 = 0
2,000,000 Cedis—2,000,000 Cedis = 0
WEALTHY PEOPLE practice the opposite and this is their amazing secret
Income— Savings = Consumption This is a Wealth Creation Concept When a smart person earns $1000, he would pay himself or save at least 10% ($100) before he thinks about spending the rest of his income. wealthy people regard savings as their most important priority. No matter the level of income, he or she would make sure to pay him/herself first before considering other expenses.
Principles of pay yourself first. 1. Your wealth is not measured by how much income you make but how much you can save. 2. Buy what you NEED but not what you WANT. 3. You don't need to make a huge income. 4. Save at least 10% of your income or $2, $4, $5 $8 $10, $15, 10,000 Cedis, 20,000 Cedis etc a day. 5. Make a standing order so that your bank will take the amount you want to save automatically into a special savings account for you. 6. Start now and don't give excuses. 7. Work extra hard and get extra income to save. 8. Save a greater part of any increase in income. 9. Invest the accumulated savings in a secured venture e.g. Buy mutual funds or treasury bills. A lot of people are unable to pay themselves first because they tend to spend much on their wants. There is a difference between needs and wants. Needs are the basic necessities such as food clothing and shelter without which you can not survive. Wants on the other hand are the things you can live without. These may also include habits and activities such as smoking, and drinking that drain you financially. You can do away with them in order to save extra money.
Example: NEEDS WANTS Food cigarettes & alcohol Clothing 30 pairs of shoes Shelter 30, 50, 100.cloths gambling/lottery Etc.
By this, the author wants to suggest the best solution for the economic concept of scarcity that makes the followers poor. You would always have aboundant resources when you stick to your needs and try to be more creative.
You may need two or three pairs of shoes but you want 40 extra pairs. You need two or four cloths but you want to have 30 extra. You need to have a wife but you want to have one or more extra women. Etc. For instance, Kwabena Darko (the owner of Darko Farms had to wear a white shirt and a black Shorts or trousers for years in order to save. Yes, he figured out his needs.
Once you are able to figure out your needs and wants, and how much you spend on them, you can forgo some less important wants and save enough money for yourself. You do not need to smoke or drink alcohol in order to survive.
To some people, they would never be able to pay themselves first but whenever there is an increase in fuel prices or an increase in rent, they would be able to pay by all means. No matter the level of your income, you can still create wealth when you decide to pay yourself first. N.B. Your wealth is not measured by how much income you make but how much you are able to save. For instance, if Mr. A makes 10,000,000 Cedis a month but saves nothing and Mr B makes 800 000 Cedis but able to save 10% or 80,000 Cedis or even 20,000 Cedis a month, then Mr B is richer than Mr. A. The reason is that Mr. B will be able to accumulate more funds for investment in future. Even if an ant is albe to save particles of your surplus food and turn it into a mound that you cannot climb then it is possible for you to save and accumulate enough wealth for your descnedants.
In one of the most powerful books I have ever read, The Automatic Millionaire, Bach D. made the best financial advice. I highly recommend that everybody reads the book and pass the message on to the generations to come. He said, "The secret to creating lasting financial change is to decide to pay yourself first and then make it automatic."
You don't need to make hundred thousand dollars, thousands of pound steering (£), or millions of Cedis to be able to pay yourself first. No matter how much the government or your company increases your wage rate, you would never have a positive change in your life unless you decide to pay yourself first.
Personal experience, My employer designed a savings plan for its employees and I was too smart to realize how good the idea was. I took advantage of the plan and decided to contribute 20% of my pay to the fund. Within some few years my accumulated savings had increased from less than ten dollars to thousands of dollars.
What makes me more excited is that, I do not put in any effort to save but my wealth continuous to grow. This is amazing!
Do not waste time at all to start paying yourself first in the same way as you pay your monthly rent to your land lord. Have your bank set up a standing order for you so that part of your earnings would be transferred into that fixed accounts. Do not ever touch that account. It should be your reserve for the future.
In order to offset the element of inflation, you can put this money into a money management accounts such as buying mutual funds, treasury bills and bonds.
Some wealthy people have been practicing the concept of "PAY YOURSELF FIRST" but many of us are ignorant about it. For instance in the traditional Ghanaian society, the smart people use the "SUSU" concept to save and accumulate wealth. This is how it works, The small scale self employed people make it an obligation to save a fixed amount of money with "SUSU" collectors on daily basis. The "susu" collectors go to their doorsteps to collect the money so they always feel obliged to save. The system helps a lot of people to mobilize funds for business expansion. However, this informal system is associated with some problems such as embezzlement and lack of continuity.
In this modern society where computers have made things possible, the best way to pay yourself is what Bach D figured out. Thus, pay yourself first but make it automatic with your bank.
Bach D used figures to explain that, when you save at least $10 a day and earn 10% returns, You would make $3,770 a year, $7,934 in two years, $61,453 in 10 years and $1,897,224 in 40 years and so forth. Once you hit 7 digits you become an automatic millionaire. This is wonderful! Yes, this is not magic it really works. In this regard when you waste $10 a day on cigarette, alcohol and other fancy stuff, then I would say you are an automatic poverty maker.
God bless Bach D because the concept works for many people around the globe especially in the developing societies where the people see the so called "vicious circle of poverty" problem as inevitable.
For instance most workers in Ghana can save 10,000 Cedis a day and make 3,650,000 Cedis a year plus between 10% to 20 % returns on investment. In 10, 20, 30 years most people would be able to create a lot of wealth and say goodbye to Mr. Poverty.
What most people believe in is to get somebody like an uncle, brother, sister, father or a friend to provide him or her with huge sums of money in order to prosper. This system creates dependency syndrome in the society. You need to know that wealth accumulation is a gradual process. You have to start from class one and graduate in the end. People who want to jump the queue by resorting to stealing and drug trafficking in order to get rich quick tend to be the losers. You need to go by the ant way and get financial wisdom. The tiny creature does not consume all its food but saves some for the future.
Remember, the best way to create wealth from the scratch is to Pay yourself first by creating a system that works automatically. Pay yourself first is the road to wealth creation and it is the best approach to get rid of the so called "vicious circle of poverty"
As many people become aware of the need to pay themselves first, they would be able to accumulate more capital for investment, create jobs, increase productivity, hence the standard of living would also rise.
Small Beginnings/start from zero
Think about this, " Un long voyage commence par le premier pas" "A journey of a thousand miles begins with the first step"
A typical rich man accumulates wealth starting from zero. In The Millionaires Mind, the author noted in his research that over 90% of the millionaires he studied in America were first generations. That is to say they started creating wealth from the scratch. All that the potential rich person needs to start with is financial wisdom. He knows that if he could raise 1Cedi today, He could double it tomorrow and triple it within the next three days. He does not despise little things. When the rich comes across a penny, he bows, thanks God and picks it up because a little drop of water makes a mighty ocean. He is always grateful to the little things that come his way. He does not rush to get rich because "Rome was not built in a day"
The rich does not eat his seed but sows it and wait patiently for it to mature. He spends time and energy to take good care of the seed. The seed would continue to regenerate some more fruits for him to enjoy for the rest of his life. So he does not need to grow any more seed. Wealth creation is like education. You need to start from class one and pursue to the university level depending on your performance. You cannot start from class 4 or 6. People who start creating wealth from class 4 without having financial wisdom face a lot of problems. Many a time they are unable to sustain their wealth. For this reason, the rich teaches his children about wealth creation so that he can pass on the wealth from one generation to another.
One day I asked Mike (a Jewish coworker) about how they create their wealth and he cited himself as an example. He said he was in his early twenties but he has been working and schooling at the same time. He also invested a lot in stocks and mutual funds in order to build the foundation for his future. I went on to ask him why worried himself to save or invest so much at his tender age. He answered that they believed in how much wealth they create for their grandchildren so he had to start doing his part. That reminded me of what I read from the Bible;
"Blessed is the man who plans for his grandchildren"
This is the direct opposite of the perception of most Africans. Most Africans believe in how best their children can take care of them and bury them when they are dead. Some even give birth to a dozen with the intention that at least one of them would grow rich and take care of the rest. Thus, most African people would decide not to work because their brothers or sisters or uncles are rich. The one who works hard tends to be the sole breadwinner for a whole bunch of people.
Upon the death or failure of business of the breadwinner the whole family gets into a serious trouble.
A person may be very poor but as soon as he is put in a position of trust, he intends to become a millionaire in a few days. The zeal to getting rich quick tends to be the root cause of social evils including embezzlement, drug trafficking and all kinds of immorality and malpractices.
Groups and associations can also create wealth for themselves and for Ghana. For instance the Ghana National Association of teachers (G N A T) have a great potential to create wealth through savings. G N A T can make huge investment, create jobs and raise their income levels. I just visited G N A T 's website and though the association is doing a good job to support their mission statement, it is expected to do something extra G N A T has a membership of 178,000 according to 2003 Controller and accountant generals Department statistics. A source revealed that, “The teacher fund which was started on 1st May, 1998 with 138 Million Cedis in the First month now stands over 51 billion Cedis. Teachers are able to source loan facilities” Teachers Fund assists teachers to credit consumer items http://www.ghanateachers.org/achievements.pdf
G N A T needs to help members to have their financial freedom by investing and maximizing the members' wealth. G N A T will do its members a great favor if it creates a system that will help members save at least 10% of their incomes for the future.
G N A T can sponsor technological development and innovations so that the association can be a partner of technology. The author is a teacher by profession and was an active member of G N A T for 6 years before leaving for US for further studies. He was ignorant about what teachers could do to help the nation in terms of investment and wealth creation. G N A T please, there is the need for a strategic business plan of action for the association. G N A T needs to focus on something different and fight for the financial freedom for the members because financial freedom is more important than job security.With financial freedom, teachers can create a lot of wealth and be proud of the teaching profession. Financial freedom can make teachers live a better life and be able to pension themselves with much confidence. Financial freedom within the teaching profession will attract some more teachers to help train our future leaders. With financial freedom, the Government would not be worried too much about wages and salaries. You have all kinds of intellectuals and business gurus among you.
Please, start doing something for Ghana and raise your living standards.. Teaching is a noble profession and we train businessmen, accountants, doctors, M Ps and even the president. The Association can invest in the production of instructional materials and teachers can better produce the appropriate educational materials.
How can the Government create Wealth for the People? Think about this, “Development is a process that begins in the mind and manifests in the actions of the people” Wealth creation is a gradual process and the duty of the government is to peruse policies that will develop the people and equip them with FINANCIAL WISDOM so that they will in turn create a SUSTAINABLE WEALTH for the nation.
“Develop the people and the people will tend to develop the environment” It is as simple as A B C. When you put underdeveloped people on a developed environment, they will destroy the development but when you put developed people on under developed environment, they will develop the environment. For this reason, successful leaders focus on human asset development. Indeed Ghanaian leaders, both the past and the present governments have done a great job by promoting education. The only challenge is that the curriculum needs to integrate knowledge with practice. There are a lot of Ghanaians who are endowed with superior technologies including Apostle Kwadwo Sarfo and the 23-year-old carmaker who used electricity that the author mentioned in the previous article. These wonderful people need to be motivated sponsored and integrated into the educational system. This will help combine knowledge with practice and create wealth from the scratch.
Thus KNOWLEDGE + PRACTICE = WISDOM. At an advanced stage of WISDOM you have TECHNOLOGICAL INNOVATIONS AND INVENTIONS. We do not want to educate people who will become job seekers.
Ghana is endowed with abundant resources but “ Resources are not they become”(Prof G. Benneh). The only way to develop Ghana and make it a wealthy nation is through technological innovations and inventions. It is the secret to become a world's super power. The author wants to suggest that all the stakeholders in Ghana, including financial institutions, companies, religious institutions, Government, and NGOs need to collaborate promote and sponsor technology as the number one factor for wealth creation. We are now in the 21st Century and God wants us to move forward. We cannot continue to depend on natural resources alone. Most Ghanaians are pregnant with superior technologies but there is little motivation. If Ghanaians are able to explore and tap natural resources like gold and diamond for sale, then it could be possible to fish out for all Ghanaians endowed with superior technologies and extract their human asset because. HUMAN ASSET is a primary source of value and a factor in production that cannot be purchased in external market. The major difference between Japan (deficient in resources) and Ghana (endowed with abundant resources) is that Japan places greater value on Japanese endowed with superior technologies while Ghana ignores her people who are endowed with superior technologies. Ghanaians are more interested in natural resources because we can sell gold and diamond for quick money. Please our leaders; wake up for now is the time. MPs, organize, promote and sponsor technological development and innovations in you respective Districts using part of the district assembly common funds. Let this be a competition among you no matter your political background. We are more interested in What we can do for Ghana. This also needs to be done at regional and at national levels. The Ministry for Trade and Industry needs to initiate some of these activities. Wealthy nations like U S A, Japan and UK have set part of the taxes they collect as grants to promote technology so Ghana can also do the same. At the end of the day Ghanaians will wonder the number of discoveries that the people will come out with. In order to be wealthy, we need to “LEARN AND PRACTICE WHAT THE WEALTHY NATIONS DO” In this 21st Century, we need leaders who are prepared to cause a change because
“Without a change there can be no breakthrough and without a breakthrough there can be no future.” Ghanaians need to change from primary oriented economy to industrial stage starting from the scratch by being 90% self-reliant.
Finally, For you to create wealth, you need to do something exra. Do somethng that most people find it difficult to do in order to become extraordinary. If everybody says it is difficult to save 10% of his or her income, just seize the opportunity to do it. If all African nations are not promoting and sponsoring their people who are endowed with SUPERIOR TECHNOLOGIES, let all Ghanains take the adventage and do it Remember that, “He who says it cannot be done is always overtaken by someone doing it”
God bless Ghana Amen!
Your comments and contributions are welcome. BY S.ACHEAMPONG(AUTHOR OF ACHIE SERIES) MBA, USA. Views expressed by the author(s) do not necessarily reflect those of GhanaHomePage.