x Abu Dhabi, UAESunday 23 July 2017

Take a tip from the smart and think before you spend

Take a tip from the smart millionaires, such as America's Warren Buffett, and think twice before you spend. Avoid impulse buying and you will soon have a tidy sum put by.

Warren Buffett still lives in the same home. Scott Eells / Bloomberg News
Warren Buffett still lives in the same home. Scott Eells / Bloomberg News

When I receive my bank statement at the end of the month, it is always interesting to look at the series of purchase choices I have made over the past 30 days. Frankly, sometimes I cannot remember that I did make a certain purchase, and at other times I am thrilled that I bought a particular item, and what a great bargain it was.

My first eye-opening experience in understanding money came after reading and hearing the stories of self-made millionaires. Through my reading and research, I learnt that many are cautious when it comes to their wealth, even if they have more than what they can spend in three lifetimes.

They do not wear very expensive clothes, or drive flashy cars, and in some cases they still live in the same house they bought before they became millionaires or billionaires, as in the case of Warren Buffett, the American billionaire investor who still lives in the Omaha home he bought in the 1960s before he became one of the world's wealthiest men.

It is interesting to read about people who can afford whatever they want but remain cautious and think twice before splashing out. Some of my friends would argue that these wealthy people are being cheap and not enjoying their lives.

I disagree. I believe that they are being smart and that "thinking twice before making a purchase" is perhaps one of the reasons that led them to be where they are today. Reading about their money management techniques and their journey has actually inspired me to be as smart and focused on money matters as much as I can.

Being wealthy and financially comfortable is an aspiration of many colleagues of mine. In fact, many of their new year and birthday resolutions often include that goal. But then when I look at their Facebook feed and Instagram pictures, I see the reason why they are still waiting to make it.

Let us look at a basic daily purchase that most of my friends and work colleagues make. A typical daily Starbucks latte costs an average of Dh18 (US$4.90), and that's without the vanilla syrup or coffee shot add-ons. Those seven daily cups add up to Dh126 per week, or Dh6,552 a year. That amount buys a return ticket to a European destination and a three-night stay at a good hotel. Or it could be used to buy a world class gym membership or serve as a down payment for a car.

The truth is that we often already have that extra cash that we are aspiring to have, but it is currently being spent as a result of our habit somewhere else. Perhaps it is going on those fancy restaurants we tend to visit two to three times a week, or towards endless shoe purchases, or Starbucks lattes and muffins.

By adopting a new mindset, our financial goals can be achieved.

I now ask myself the following question before making a purchase: "Do I really need this? Or is this for pleasure only and purely unnecessary?"

Reciting that mantra over and over again, has actually helped me a lot.

Another tip is to avoid buying on impulse or when you are upset. Whoever came up with the concept of "retail therapy" is actually very wrong. It creates more harm than good. Give it a couple of days' time to think before buying, to see if you really need to do so. By adopting this process, I became a more sensible buyer.

That does not mean that I never buy purely for pleasure. I love to enjoy my life and indulge in new experiences, but at the same time it is good to shed unnecessary expenditures - and by doing so you will end up having a tidy sum put by when you really need it.

It boils down to this: if we are really determined to get that extra cash and accumulate a fortune, then we can find that money in some part of our lives. With a slight change in lifestyle habit and a dose of patience, we can reach our financial goals in no time.

 

Manar Al Hinai is an award-winning Emirati writer and fashion designer based in Abu Dhabi