How much you make vs how much you keep

How much you make vs how much you keep


Without doubt and quite instantly one would jump to the conclusion that most of us attribute too much attention on the first terminology— how much you make and in the process tend to ignore the corresponding – how much you keep.
Quite often, at parties, social gatherings or various other forums you must have come across a standard question wherein somebody [may be an elderly person] is eager to know as to how much are your earnings per month or per annum.

Have you ever seen somebody asking a follow-up question to the same person so as to know how much that person is saving out of the money he/she earns per month? To the best of my knowledge the second question never emerges and thus is forgotten completely. But my basic question remains as to – “why do we attach so much importance to the earning part and least to the savings one”?

Does earning only matters to us and not the savings? Let us explore and find it out. Assume, John is a high flying executive working with a multinational company and earns a monthly salary of 5m/-. Against this, Rahim is not that lucky as his monthly salary from the job is around 3m/-. Simple mathematics, a big difference of 2m/- – meaning John earns 2m/- more than Rahim every month. This was the earning part.

Now let us shift our focus to their respective life styles, which ultimately would determine how much they respectively keep or save out of their monthly earnings. John as rightly nicknamed ‘high-flying’ believes in maintaining a lavish life style and thus ends up spending a major part of his salary. By the time month end approaches, John is left with hardly 200,000/-, which can be termed as his monthly saving.

On the other hand, Rahim is practicing a moderate life with a motto to achieve financial independence sooner than later. As a result, Rahim makes it a point to save at least 20% of his monthly salary invariably. Can we now make the simple mathematical calculations and arrive at the end result? The 20% of Rahim’s monthly salary would amount to Tzs. 600,000/-, which is his net savings per month against a meagre amount of Tzs. 200,000/- for John.

The end result – Rahim is able to save thrice the amount saved by John. So that being the case, who among them would achieve financial independence first? The answer is loud and clear as it would definitely be Rahim and not John. This is despite the fact that John is earning a whole 2m/- in excess of what Rahim is making per month.

But when you analyse their respective savings pattern, Rahim greatly outplays John. Similar may be the stories for many of us who, like John, concentrate too much on the earning part and tend to ignore the other equally important element – which is nothing but savings. However, before proceeding further let me put a disclaimer that from the above outlined text, it should not be construed that I am against making or earning more money. For sure, this is not what I mean.

But the important point to understand here is that with every increase in one’s earning, the corresponding savings must also increase on the same lines. Otherwise there is no much use in earning more money, if your expenses have also increased to match the extra earning. As rightly mentioned by Robert Kiyosaki in his book Rich Dad Poor Dad – “It is not about how much you make, but it’s about how much you keep”. So what really matters is not the earning part but the savings part.

Thus, stop concentrating too much on your earnings whereas the need of the hour is to bring back your focus on the savings, because this is the only element of your life which ultimately would lead to your financial independence. Now I leave the choice squarely on you, Cheers!!!

AT a recent 20th conference of financial ...

Mwandishi: Jagjit Singh

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