Tuesday, April 5, 2016

What going broke taught me about money and life

I have gone broke twice in my career so far, it’s something that happens quit often to entrepreneurs because we have a bad habit of taking on huge risks that usually involve investing all we have into something and even sometimes borrowing a little more on the side.

My real first experience of living on almost nothing was right after university when I left home to pursue my dreams. At that time, I was by no means ready to be on my own and a couple of months at home would have been the best play but for some reason I was too excited about the idea of going out in the world to find my place. With only a laptop and $5 I bid my parents farewell and set off on my way.

I spent the following three months sleeping on a friends couch as I worked my ass off to establish my first media company Carlos & Patrick. During this period, I religiously lived on a simple diet of Kikomado (chapatti & beans) with a glass of water. Breakfast, lunch and supper. I remember one time having only ugx 1000 (20 cents) and I had to choose between purchasing a jerry can of water for ugx 200 but then that would leave me  short of buying a meal. I thought about it for two hours until I decided that I really needed that shower.

When I look back at these experiences, I realize that, dreadful though they were, they taught me invaluable lessons about money and life and if I had to, I’d do it all over again. These are some of the lessons I learnt.

Money makes money
Cash is king and if you do not have it, you cannot make more of it, which is why the richer get richer, because they have the money to invest. Establish different sources of cash flows, that way there is always money coming in from somewhere. Also be smart with your money, learn to save. 

Pursue wealth not just riches
Being rich is great but being wealthier is better because it’s a more holistic approach to building an empire. Wealth emphases monetary value, social capital (people) and assets.
The second time I experienced a period of being broke was when I quit my job in 2014. The reason was twofold; jump back into self-employment and to reconnect with my parents with whom I hoped to smooth things over with (things hadn’t ended well when I left home after college).
Soon after moving back home, it did not take long for my savings to start drying up while the clients I had hoped to work with stood me up. My projections where in the gutter. That December 2014, I was hit with more bad news; my kidneys were failing. I was unemployed so I didn’t have medical coverage. Spending the last of my savings, I saw specialists, run tests as the condition accelerated.

Mid December found me admitted in the run down Mulago hospital, helplessly fighting for my life. It was a dark time and at that point, even though I did not have a penny to my name, family and friends stood by my side through it all. It was a humbling experience to witness first hand how other people pour love and happiness into our lives making us a much richer version of ourselves. However this was only possible because with my free time earlier that year, I had spent it reconnecting with the people in my life and actually building bonds, that way when I was in need, they were there for me, not so much because they owed me anything but rather because I took the time to invest in these relationships. Build wealth not just riches.

Money should move forward not backwards
The question is not whether the money you currently have will be spent or not because it will but rather, what it is spent on will make the world of difference. Spend your money in such a way that it will pay returns in future also known as investment. For example, if you have $50 in your wallet and you happen to be hungry yet at the same time you need to make business cards. From an investment point of view, making business cards is a better expenditure because it is likely to yield returns in form of business while eating might satisfy a preexisting need, it does not send your money into the future where it will yield returns.

Manage the debt burden/risk
Every decent human being at some point accumulate debts and if you are broke, there is a 90% chance you owe some people money. At first, the thought that you do not have the money to pay your debts will drive you insane which might force you to make promises you cannot keep. Take time off to access your situation and during this period, do not take on any new debts as you think of a plan to pay back those you owe. The other amateur mistake is trying to pay back all your debts at once, leaving you broke once again. It’s important to come up with a payment plan to reduce your debts and whatever money you get, decide the percentage that will go towards paying arrears and that which is for investment. Remember money makes money and it should always be moving forward.

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