What’s your money perspective?

Bill and Okoth are friends. Okoth runs a business and Bill is a successful corporate lawyer at a global organisation. They are catching up over a drink, and in the course of that, the discussion turns to a story circulating on social media about someone who has bought a car in cash for Sh7 million. Bill thinks it is an absurd amount of money to spend on a car – or on anything, for that matter. Please note that Bill earns a staggering Sh1 million a month in salary.

On the other hand, Okoth is doesn’t think this is a lot of money, even though he does not earn anything close to what Bill earns. His pays himself Sh200, 000 per month from his business every month, and sometimes a little on top if it has been a good month. Why do Bill and Okoth who are think so differently about this amount?

Business people have a very different relationship with money than people whose only source of income is a salary. This difference has both its positives and negatives for both groups of people.

Okoth’s business turns over about Sh40 million a year. However, he receives it and also pays it out over the course of 12 months, so it doesn’t seem like a lot of money. He has dealt with Sh7 million many times over. He has invoiced in millions and received payments in millions. He thinks, plans and even spends in millions. He is accustomed to it and has access to it.

NO INTERACTION WITH MONEY

Bill has a very high paying job, but doesn’t interact with money at that level. He doesn’t have a close relationship with his organisation’s funds. He doesn’t control or have access to the funds. The only money he has that relationship with is his salary. Bill does not have another source of income so he sees Sh1 million as his maximum payment.

Okoth views the Sh200, 000 he takes home as his minimum income. Should his business get to the point where it can afford to pay him that same one million shillings, he would still view this as the minimum amount he can earn. Okoth also looks at possibility differently. If he decided to buy that car in a year’s time, he can figure out how to do it. You see, he knows how to make Sh7 milllion and more. As a business owner, you are responsible for generating revenue so you learn to get creative about it.

Entrepreneurs are used to making money. That is why business people commit to things even when they don’t know where the money is coming from. Every day they ask themselves what needs to be done to achieve the things they need to. However, some business owners run the risk of treating their business funds as personal money, and thus not exercising the financial discipline it takes to diversify their investments in order to support themselves if their current business fails.  It is very likely that Bill will end up wealthier than Okoth if he plans and invests his salary.

My advice to Bill and others in employment is to think beyond your salary. A salary can be a powerful resource; use it to build investments that also grow or generate income.

And to Okoth and other business people, remember that what the business makes is not yours, so don’t get caught up in the illusion that you personally have a lot of money just because you know how to make money. Remember, wealth is what works when you’re not working – and it doesn’t matter whether you are employed or self-employed. The challenge we all face is turning our incomes into wealth.

To sign up for the Centonomy entrepreneurship or wealth creations programmes please contact Waceke on [email protected]