Wealth is built on the foundation of prudent financial decisions. A financial decision can determine whether you get rich or whether you lose your riches. Today, we take a look at some of the major money decisions that can take your finances down from the eyes of both renowned ex world millionaires and local business executives.
The emotional influencers: Emotions are not good conductors of money especially where family and empathy are involved. Purity Kagwiria, the Executive Director at Akili Dada, a leadership incubation organization for women and girls in Africa, offers her own example. “There are limits to giving even to your family when you are financially blessed. Personally, being the first person in a few generations of my family to complete high school, go on into university and get good jobs meant that I had immense financial responsibilities, which I’d meet often out of guilt. I have since learned to say no, not to feel guilty of my accomplishments, and not to make financial decisions based on how guilty a relative made me feel.”
Borrowing spree: This was the fatal mistake that brought down Eike Batista, a former oil and gas production mogul in Brazil. By early 2012, the Bloomberg Billionaires Index reported that Eike had managed to accumulate a net worth of up to $35 billion. This effectively made him the seventh richest person in the world at the time. One year later in 2014, Eike had gone broke and now owed creditors over $1.2 billion. His main business, had debts of up to $5.1 billion. The entrepreneur had gone on a borrowing spree to fund the development of his business. At the end, his businesses failed to break even, with four out of five of his ventures succumbing to heavy debts.
Bad timing: Timing is of the essence when it comes to making a kill in the jungle of wealth. Just before the 2008 global financial meltdown, Sean Quinn a billionaire who was regarded as the richest man in Ireland invested 25 per cent of his family’s entire wealth in an Irish bank. In making this huge investment, he leveraged his family’s insurance company. As the financial crisis took its toll, Quinn and his family’s multi-billion net worth vanished, leaving him with billions in debt.
The cheat’s way: Some of Kenya’s wealthy are tainted. Don’t get tempted to follow their cheat sheet. Former billionaire Allen Stanford is currently serving a 101 prison sentence after building his wealth through conman-ship. Locally, billionaires behind the fall of a local bank are staring at the same possibility after defrauding and over-indulging in lavish expenditures in Nairobi and Dubai with investors’ money.
Quick Takeaway:
Expect failures but learn from them: Billionaire entrepreneur Richard Branson, has posted some spectacular failures in his entrepreneurship journey. Among his famous failures include Virgin Drinks, social networking platform VirginStudent, wedding dress business Virgin Brides, online car sales business Virgin Cars, and a lingerie store line Virginware. Despite the failures, Branson has harvested key lessons that have sharpened his business acumen. “Mostly, people are likely to venture into wealth creation projects that go head to head with existing big corporates. And while it may seem flattering to receive attention from a bigger rival, it quickly becomes clear you made a mistake venturing into a certain field and your competitor will wipe you out. Virgin Drinks wanted to go head-to head with Coca Cola and this was pure madness. But my mistakes gave me the chance to bounce back and make smarter choices in my subsequent moves,” he says.