Elephants are important animals in some Asian and Far Eastern countries. They are used as beasts of burden, transportation and even for military purposes in days gone by. In Siam, the modern day Thailand, there is a rare breed of elephant that is albino. This albino elephant is was so venerated that each one found was considered to belong to the king. It was a serious crime to work, mistreat or kill the albino, or white elephant.
As you can imagine, an elephant is not cheap to feed, especially if it cannot be made to work to earn its keep. This got the king thinking of a neat and effective way to neutralize his foes. Anyone who displeased the king was given a royal gift of a white elephant, which then proceeded to eat the recipient into financial ruin. The term “White Elephant” came to mean something useless that is a big financial drain yet is hard to get rid of.
Do you have any white elephants of your own? The most common white elephant people acquire is a huge and expensive home that they do not use or need. If your career is urban based, building a huge and expensive house in your rural area that you visit two weeks a year while you rent in the city is not the epitome of wisdom. Remember, though it was expensive to build, it will bring you no income and, to make it worse, has a low market value and even lower liquidity. Unless you are positioning yourself for a political career, the only boost your white elephant can give you is one of the ego kind. Too many people are living in such homes in retirement, but suffering because they lack money for other necessities such as medical care.
Another common white elephant is unviable loss making business ventures. Many hope to get rich quick by venturing into business. While a successful business is often the source of wealth for some people, a huge percentage of new businesses collapse within a few years of starting. Just because your friend tells you that she is making a killing in her business, it doesn’t mean that you will be equally successful in a copycat outfit. Starting a business without a well thought out business plan, adequate financing, knowledge of that particular kind of business and rock hard determination is like trying to catch fish by dipping your hand into a lake at random. You have very little chance of success. Every impatient, get rich quick person either ignores or is ignorant of one basic fact: there is an unchanging relationship between risk and return. The higher the return you are expecting, the higher the risk you are taking.
Too many individuals hang on to businesses that are just not working. Each month, instead of the business producing money for your family, it demands more money to keep afloat. Such a businessperson finds themselves borrowing left, right and center to keep things afloat. Digging holes to fill others. Wake up and face the facts, a failing business can wipe out a huge amount of money in a very short time. Money that took you years to save, or will take you years to repay. A business that isn’t working is like a leach; kill it or it will suck you dry.
The other common white elephant may not be white it all; it is that dream car. In a society that is beholden of conspicuous consumption, a car is popular status symbol. The car that someone drives is most often the first thing that is mentioned when describing their financial status. This results in a lot of pressure on individuals to own a car, whether they can afford one or not. People do everything in their power to be seen in the most admired model they can manage to drive, often sacrificing other goals for the pleasure. It is not unusual to see the owner of an expensive car living in a small rented house and struggling to provide for himself and his family.
Those with low income but who insist on being car owners end up in an even worse situation. Because of their limited resources, they are forced to buy very old vehicles which cost a lot to run as they constantly need of repair and are not fuel efficient. The fact that a car is nearing the end of it economic life means that many parts will keep failing and will have to be replaced – the last thing a cash-strapped new owner needs. He therefore spends a lot of time and money trying to keep the contraption running. Often a major breakdown will result in the car finally ending up on stones rusting away until the hapless owner eventually raises some good money, to throw it after bad by trying to revive the machine. How much better off the owner would have been had he spent such money on improving himself by taking an educational course and in that way, ensuring a higher future income, or even saved that money for less impressive but more important things. Buy a car you can afford, if you cannot afford to own one, leave them to those who can.
In life, it is important to be ambitious. However, in your financial planning, one needs to be realistic and base your actions on the available resources. Fail to do so and you may wake up one morning and find a white elephant at your doorstep!
© By MANYARA KIRAGO, RFC®
financial-counselling.com
