Restrain from spending and invest your money

One of my favourite pastimes is observing the spending habits of people that frequent shopping malls. Given my interest in personal finance and wealth creation, observing the spending habits and behaviour of middle class shoppers helps me in my quest for financial independence and ensuring that I don’t fall in the same spending trap.
Since 2007, my responsibilities at work have required me to travel mostly to the Middle East and Asia, the main markets that my employer operates in. While I absolutely hate the fact that I have to be away from my family, I enjoy watching the spending habits and patterns of my colleagues and other shoppers in the shopping malls overseas.
On these trips, I take time to probe and interview my colleagues, in an attempt to understand what exactly guides their shopping choices and why they feel compelled to buy stuff when they travel. Let me share with you some interesting observations.
Firstly, I was able to bust the myth that only women love shopping; men are also avid shoppers. Admittedly, the majority of shoppers are female. That said, the male shoppers are generally big spenders. Secondly, it is clear that the reasons we buy things for our loved ones when we travel are varied. For some of us, it is the guilt of being absent from our loved ones, especially our children and we compensate for this guilt by buying them gifts.
Then, there is the group that misses their loved ones so much so we buy them stuff to keep them alive in our memories. There is yet another group that shops for their loved ones because the consequences of not buying anything from “outside countries” are far reaching and we do not want the headache of being reminded of this omission for the rest of their lives.
I also observed another group who shopped because they are in the company of fellow shoppers - some sort of peer pressure phenomenon. I found that this category of shopper usually suffers from shopper’s remorse the following day; they curse themselves for getting carried away and regret their decision to go shopping.
Then we have what I refer to as the “exposed” traveller, this group have planned for this shopping experience, they know exactly what they want to buy and usually have a written list of items they intend to buy.
The category I found particularly interesting and enjoyed studying the most were those who shop because the price is too good to be true. These are the people looking for items on SALE. On one of these trips I accompanied a colleague to a mall out of town, where everything was “dirt cheap” we shopped from 9:30am to 10pm.
Yes you read that correctly, we were in that mall for nearly 12 hours. Because of the rock bottom prices, my colleague bought stuff for friends, relatives, in-laws and well-wishers. She got so irritated that I was not shopping that she offered to buy me a couple of blouses and a handbag.
What was mind boggling was that intuitively, the shopkeepers knew that I was not going to buy anything and would not bother with me when we entered a shop.
Every shopkeeper seemed to be drawn to her like she had some sort of magnetic pull. She did not disappoint them; every time she was told the price of the item that took her fancy, she could not resist the temptation to buy. I have since developed a healthy fear for the SALE sign on any shop or item.
I related these findings to my mentor and he was amused yet unimpressed by my “thesis” on shopping habits of the middle class. He said to me “Grace, you are missing the point, you are feeling good about the fact that you don’t shop or spend money but that will never make you rich”.
He advised that I change my approach of this whole research on shopping habits, recommending that on subsequent trips I should make a note of items I would have liked to buy and instead of spending on those items invest that money.
So if the items that I would have liked to buy on any trip were worth $500, I should put aside that $500 that I would have spent and then look for something I can invest it in or keep the money on a savings account until it became enough for me to make a meaningful investment.
He challenged me to take this approach a step further and apply this logic even when I am not travelling but merely wandering around in any shop or supermarket back home. The wealth creation principle truth here is; saving money or putting off expenditure will not make you wealthy. What will make you wealthy is investing what you save as this multiplies what you have.
A farmer who keeps his seed in the storehouse limits his potential return, while the one who goes out and plants it (invests) stands a chance to multiply what he has exponentially.
This approach has served me well. I have seen my savings grow and over time this has translated into a tidy sum of money for investment.

The writer is Standard Chartered Bank’s head of financial markets in East Africa. E-mail: GraceTibihikirra.Makoko@ sc.com.

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