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The 7 Cures for a Lean Purse

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The pursuit of happiness is often quoted as the greatest of human quests, but I would argue that the pursuit of riches, not happiness, has shaped the world we live in today. Click To Tweet

The pursuit of happiness is often quoted as the greatest of human quests, but I would argue that the pursuit of riches, not happiness, has shaped the world we live in today. In a material world, money will always factor in everything you do. In fact, money determines what we can and cannot realistically do. Life is a prison of your limitations, but the size of the prison varies depending on the thickness of your purse.

For all the hue and cry about economic inequality, the rules of making money are the same whether you are rich or poor. All you have to do is master the concept of investing. One of the best guides I have found on the subject is The Richest Man in Babylon, a book unlike any other I have ever read in its simplicity and wisdom. But these cures are not a guide to making quick riches.

In fact, it will take you a few years to start to accumulate a good amount of wealth using this formula. It’s a secret that shows its workings, slowly, over time, with continued use. Once you understand that investing is all the difference between a life of comfort and a life of constraint, accumulating wealth becomes so much easier.  

1.     Pay yourself first

Where does all the money you make disappear to? In short, what do you leave for yourself after you pay the shopkeeper, the landlord, the conductor, the fuel levy, etc.? The sad truth is that most people never really get to reap the rewards of their work because they are too busy spending the money.

According to The Richest Man in Babylon, you need to put aside 10% of all your earnings to invest in your future. This is how you pay yourself first.

2.    Budget for your money before spending

The second cure for a lean purse is learning to budget. A good budget helps you to avoid wasting money. It gives you the chance to make your money work for, not against you, by determining the exact use of every cent you make beforehand. This way, you are less likely to waste your money.

However, budgeting goes beyond planning your expenditures. It comes in handy when you are planning your investment activities as well. Just as failing to plan is planning to fail, so is failing to budget planning to waste money.

3.    Constantly seek to boost your ability to earn

Even as you save religiously for the future, its important that you continually grow your money base as well. With inflation, the life you are living now for 10k will cost you 12k in a year or two. If you don’t keep up with the economy, you will soon be unable to meet your savings obligations.

Boosting the ability to make money entails learning new skills, increasing your current education, to be wiser. This last one is also very useful in managing your accumulating wealth.  

4.    Convert your savings into money-making activities

Many people fall at the fourth stage, because they use their accumulated savings on “stuff”. Everything from expensive furniture, vacations, cars, and all those other trappings of wealth. As enjoyable as these things are, that is not the reason why you are doing all of this.

The 10% you pay yourself should be for no other reason but investing in the future. All other needs must be taken care of with the bigger 90%. Always.

5.    Secure your savings

It is not enough to just invest your savings. You must do so in a manner that doesn’t predispose your investment to loss. Invest only in ventures where you can be sure that your principal is safe.

According to The Richest Man in Babylon, a habit of consulting with experts is indispensable for money making. Only by listening to men and women wise in the handling of money can you acquire the same skills. This is also the best way to avoid unsafe investments.    

6.    Invest in a good home

A good home is part of the success package. But it serves quite an important role. Good living conditions facilitate work and thus better earnings by giving you peace of mind and a comfortable place to sleep – two things that are critical for a good life.

In Kenya, owning a piece of land is a lifelong dream for many. It’s only a mistake to use the 10% for this. Wherever possible, build yourself a home from the 90% left over. This way, you can be truly and completely secure in your new home – with investments to keep you comfortable long into the future.

7.     Insure your future income

The cycle of life is incontrovertible – we will all get old. You should their retirement ahead of time, accumulating the money that will support them and their families after retirement. Start a retirement fund for yourself even if you have one with your current employer. All you have to do is find a reliable bank or SACCO to entrust your savings to.  Your future self will thank you for your foresight later on.    

Riches are made by those who are able to harness the power of the present to direct the future. If you wanted to be rich today, you should have worked tomorrow. If you want to be rich tomorrow, you must work today.  

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