The Great Financial Rebuild Book

Frugality

Now, everyone has things that they enjoy spending money on, and you probably try to rationalize why you deserve that extra spending. But you probably do not need a lot of the things that you spend money on. Whenever I am invited to speak about personal finance few words catch the attention of people like the word frugality.

A person who lives simply and economically can be called frugal. Frugal and thrifty have positive meanings. They are usually used to refer to someone careful about how he/she spends money, one who lives simply and economically. It is one that I hope sticks in your vocabulary long after you have put down this book and long after COVID-19 crisis is a distant memory. It is a word and a belief that I would love to see exercised as a national trait. Many years ago, I realised that Ugandans are torn between being British and being Americans in their expenditure patterns. I say this with a light touch in that the mannerisms and upbringing of most Ugandan cultures is comparable to that of the English, but when it comes to the love for the flashy stuff and bling-bling, we copy our American friends, especially African Americans, yet the wages we earn are not comparable to the purchasing power of Americans.

During COVID-19 crisis, one thing that has stood out for me has been the resilience of our working population. I had feared that when the lockdown was introduced, we would suffer mass starvation in about five days but we did not and the question is: why? The first reason is that the majority in the informal economy are used to seasonal fluctuations and changing business lines quickly. This is what many did. I saw someone that moved between selling fruits, masks, house brokerage and stone mining in a space of barely three months of the lockdown. This allowed millions to earn a living even if the revenues were much lower than before. This is what helped. Instead of being in a lockdown, the market for goods and services for essential items just moved to people’s homes. You noticed many vendors doing house rounds. With the income earned many could keep the pangs of hunger away for a little while.

The second and most interesting reason was that many people simply downgraded and lived on less than they were used to. They bought only basics and some went out of their way to sample items that were considered a taboo in their culture like eating Lake Victoria Sardines (Mukene).

This forced reduced consumption is not good for the economy but I hope it will breed a new generation of people that learn to live frugally and for much less than they earn. The culture of buying things because they are fancy or trendy is one that I will not miss. This is the kind of consumerism that has been robbing our people of the money they need to invest, earn passive income and create wealth.

The idea that I am emphasizing here is that when markets open, when the economy is re-opened fully and the new normal sets in, try to keep your standards of living nearer where you were in the lockdown while at the same time earning and investing the balance. It will be dumb to zoom back to your former living standard. Of course, I know that there are people who were never forced to reduce their living standards because they already live below their means and could have sustained a lockdown for years without changing their lives. However, if you are one of those that were forced to downsize, it was your warning sign that you not only need to work harder but you also need to keep your expenses in check.

You are probably going to argue that you buy what you can afford. Given that you can afford it, does that mean you should buy it? I do not buy things just because I can afford them. This is a critical element of frugality and applies to so many items we spend money on. The great news is that once you can resist the need to splurge on things you can afford, it means that you have a great self-internal accountability mechanism. It means that you do not like exchanging value for things of no value just because you can afford them. I have seen people struggle to earn money for a month only to spend it in days. I have seen people get millions on their accounts only to be broke a couple of days or weeks later. The money dries up faster than it took them to earn it.

So look through what you have been spending on in the lockdown or even before that: As we talk about rebuilding our lives, communities, businesses and economies, ask yourself: Do I need the five pairs of jeans I bought with my money, or the 10 pairs of shoes? Plan out what you will do differently once the crisis is over. You will need to play both defense and offence at the same time: increasing your earnings while at the same time reducing your expenditure. Do not expect anyone to come and bail you out. It is better to know that you are on your own. If anybody does not show up, at least you will not be disappointed.

It is quite surprising that many people do not act in their best interest when it comes to their finances. If they did, they would at least pay themselves first before they pay anyone else. Your goal is to know where your money is going and what it is getting for you in return. The ultimate goal should be financial independence………..