Some people think New Year’s Resolutions are pointless. What's the point in waiting until the 31st of December to make a change that you can make sooner; I don't entirely agree.
You should be dynamically adjusting your life and your finances to take account of new circumstances. That said, you need to stop at some point and take stock of the last six or twelve months to see if your plans are working. You can't do that every day; you're probably too busy. So what goes into your New Year's Resolutions? Everything: your finances, your career, your love life and everything in between. I would encourage everyone to affirm their resolutions by writing them down.
Did I do or achieve everything I set out to do in 2012, no, but writing it down helped me get closer. Don’t make your plans too complicated. Have one or two big goals for 2013 and several small goals. Get a pen and paper out and write a draft of your New Year’s Resolutions based on these questions:
Start off with your home: are there things you could have done to be a better girlfriend, wife or mother?
Financially, would you like to exercise better control over your spending habits in 2013? How do you plan on doing that?
Do you want to get a promotion at work? How are you going to let your boss know that you are worthy of the promotion? Don’t get ahead by pushing others down; that sort of success is empty.
Do you want a pay rise? How do you plan on telling your boss? How will you justify your request? High inflation is probably not a good enough justification.
Do you have a business? What are your business goals for 2013? Will you sell the same products or expand your offering? What are your sales goals? What is your plan for attracting new customers?
Do you want to start a business in 2013? Have you written a list of the things you will need to get the business going? Are your funds sorted?
Would you like to learn a new sport or improve your health? How do you plan on doing that? If you want to lose weight, exactly how much do you want to lose? How do you plan on changing bad eating habits? It’s easier to achieve financial success if you yourself are healthy.
Don’t aim to achieve too many things for you will end up achieving nothing. When things aren’t going the way you want, be patient.
The financial success one can achieve as an employee is limited and that may be good enough for you. If you want to boost your income start a business: the upside is unlimited, the downside limited. You don’t need to resign to start. Labour is quite cheap in Malawi so set your plan and get someone to work for you. You could get a relative to work for you for free but keep in mind that relatives can pilfer your money just as easily as a neutral party if not more so. When things take off you can start running your business on a full-time basis.
“The majority of men meet with failure because of their lack of persistence in creating new plans to take the place of those which fail.” Napoleon Hill
Do you and your husband budget and plan expenditures together?
Unfortunately, many families in Malawi don't manage their finances as a partnership. Some husbands and wives don't even know each other's salaries. There's a wide array of reasons for this: perhaps the husband doesn't want his family to worry about money especially when his finances are shaky; or the wife doesn't want her husband to be jealous of her higher earnings: If I tell him how much I earn, why, he might just reduce his contribution to the household.
If you keep your finances a secret from each other once your relationship becomes serious, that isn't going to change when you get married. So it's best to start financial collaboration early.
When I met my now husband in 2009, it took us only about six months to realise we were one day going to get married and we started discussing how we could combine our funds to buy a house together. Independently our finances couldn't stretch to buy a good enough house but put together we had a lot more financial firepower.
You don't have to put all your money together but if you sit down and discuss how much you have and any money you expect to have in future you can make a plan to rival any individual plans.
Don't be too quick to go into financial partnerships with friends before you figure out what you can achieve with your own husband. Personally, I would be very wary about going into a business with a friend.
If you’re not married be cautious about merging your finances. I know one girl who combined all her finances with a boyfriend only to lose out big time in the end. She called his place of work to ask for him and was told he had been made redundant six months before. When she questioned him, he just said he didn’t want to talk about it. The next morning, when she woke up he was gone. She only later found out that he had left her lots of debt. He had access to all her accounts and had been doing deals in her name.
He was gone. She knew where he was, he was at his parents’ house in a state of depression, and to repair her name she had to pay back all the debts out of her own pocket. It took her a good three years to clear them all. You have very little control and claim over a boyfriend so it’s best to move with caution.
I know another girl who got married to an unemployed man. He had access to her funds and was busy spending the money on other women! This is obviously completely unacceptable. They have now separated.
I recommend having one bank account that you share with your husband/partner and separate personal bank accounts for other things. Clearly personal preferences differ; the point of my two stories is to warn you of the potential negative consequences born of forming business partnerships with anyone, even a spouse.
Here’s some homework for you: tonight you and your husband should sit down and make one major investment plan for 2013.
“A friendship founded on business is better than a business founded on friendship.” John D. Rockefeller
Debts don't just disappear on their own; I'm sure you know that.
Some debt is good. If you borrowed to invest in a business or a property then hopefully your return on investment will more than replace the borrowed funds.
If you borrowed to buy clothes and other wasting chattels - possessions that start to fall in value the moment you purchase them - you need to get rid of that debt fast. This unnecessary burden will hold you back from progress.
This is the strategy I recommend:
1. Don't borrow any more money until you have paid back all current loans.
This is hopefully an easy commitment to make.
2. List your debts
Fruit Seller - MWK2,000
Uncle James - MWK5,000
Suits for Work - MWK30,000
Handbag Seller - MWK8,000
Total debts: MWK45,000
3. Decide what percentage of your salary you can afford to dedicate to repaying borrowed money. This should be 10% of your salary or more if you can afford it. For example:
I assume that your monthly salary after tax is MWK80,000.
As you will remember from last week's article, MWK8,000 (10%) has to immediately be placed in your Look But Don't Touch (LBDT) account. Leaving MWK72,000.
If you can commit 15% of your monthly salary to debt repayment that is MWK12,000 that you have to set aside.
4. Visit each creditor on your list and explain how much you will repay them every month. Each person should ideally be repaid on a pro-rata basis. However, the fruit seller should be repaid in one go. MWK2,000 is very significant to her.
What do I mean by repaying on a pro-rata basis?
Pro-rata repayments are based on the percentage of your debt owed to each party: 11.6% of your debts are to your uncle, 70% to the suit seller and 18.4% to the handbag seller.
So, in the first month your MWK12,000 repays the following amounts:
In the second month your MWK12,000 repays the following amounts:
You pay these amounts until each debt is fully cleared. Given this level of debt and a commitment to repay debts using only 15% of your salary, you would be debt free in four months, assuming no interest is being charged.
It is important you tell every debtor exactly what your repayment formula is and how many other people you are repaying so that they don't chase you for payment. If you make your repayments on time and without a reminder you will gain the trust of your creditors.
What if a creditor requests to be paid back first because he has an obligation? You'll need to explain that you simply can't afford to do that. They either agree to the repayment schedule or get nothing back!
From the 5th month onwards you would have an extra MWK12,000 that is all yours. You would be debt free, stress free and well on your way to financial freedom. If your debt burden is larger it will take many more months but you will eventually clear it.
"If your outgoings exceed your income, then your upkeep will be your downfall." Bill Earle
Every couple of years I re-read "The Richest Man in Babylon" by George S. Clason. It's only 150 pages long or so but the principles on money management taught in this book are timeless. I love the book so much that I keep a few spare copies to give away as gifts whenever the opportunity arises.
Strange but true: if you put aside one-tenth of your income and only allow yourself to spend nine-tenths you will not struggle any more (or any less) than you did before.
"How?" I hear you ask. "I already struggle to make ends meet. There is no way I can save."
Try it! That's all I ask.
This principle is the start of bringing your money under control. If you only have one bank account create a new bank account because it is almost impossible to save if the money is coming out of the same pot.
At the end of every month, when you receive your pay check take 10% off and place it into your LBDT account, the Look But Don't Touch account. Think of this money as though it isn't even yours. That money has been sanctioned by God for a greater purpose. If it makes it easier, look upon these savings in the same way as you do tax - someone else's money.
When I started saving in this way I took it very seriously. If someone asked me for money when I only had LBDT funds left, I would tell them I was broke because I was - the money I allowed myself to spend, had been spent. (Next week we will develop a strategy for killing your debts off so that you don't have any issues with creditors.)
If you use this strategy don't make the mistake of telling people that you have money but you can't touch it; they won't understand. This is your secret and is the start to building your asset base.
I created such a great psychological barrier between me and my LBDT money that I couldn't just spend it with ease.
Prior to making any other plans 10% of your disposable (post-tax) income must be placed in a separate account.
So what is this money for?
It's for the big goal you are working towards. Buying a plot, building a house, starting a business, whatever that big plan is.
That said, in the current inflationary environment it is not advisable to save for too long. You might save for six months then find that your hard-earned savings are made worthless by a steep hike in inflation or a currency devaluation.
What's the solution?
Break your goal into "baby steps". So, if you are building your own house the next step might be buying a load of bricks or some bags of cement. As soon as the capital in your LBDT account reaches the amount needed to complete step one, spend it and start saving towards step two.
When your savings have a purpose it is so much easier to save.
Actionable steps for this week:
"Faith is taking the first step even when you can't see the whole staircase." Martin Luther King, Jr
Are you an impulsive shopper?
If so, instead of buying what you want immediately, use these tried and tested strategies to tackle your impulse to buy.
1. Sleep on it.
Just because you enter a shop it doesn't mean you have to buy something. I feel that guilt sometimes but I really shouldn't and neither should you. You don't owe the shopkeeper anything for simply walking into their shop. You don't need to show them that you have firepower in your purse. So what if they think you're a broke window-shopper? That's their problem.
There is no shame in looking at items, even trying them on and then saying, "I need to think about whether I want to buy this or not." Or perhaps, "I need to consult my husband before I buy this" and my personal favourite, "I might be back, thanks".
It's especially hard to leave the shop without buying when the shop manager or someone else that works in the shop has been looking at you like, "She's not going to buy anyway!" Instinctively you want to show them that you can and you will! I have felt this emotion myself so I know how strong it is but my advice is, fight it. The money is yours and you should not hand it over to someone else so easily.
2. Don't go to the shops
Some people find it extremely hard to resist the urge to buy. The solution to this is simple, don't go into the shop in the first place, especially if you feel a strong obligation to buy. There are some shops where you simply find it hard to control yourself and these are the ones you need to avoid the most.
If you get sudden urges to go to your favourite restaurant, distract yourself by cooking something for yourself. Learn how to make that dish that you like. If you can get your husband or boyfriend to stay at home and cook together, you might find that you prefer couple-cooking over eating in a restaurant.
3. Change friends
You know the ones I am talking about. Every time you are with them they want to go and eat in an expensive restaurant or to have drinks at a pricey bar. They think sitting at home and chatting is boring. You don't have the money for these lavish expenditures but they expect you to pitch in anyway.
Friends like these will not help you build your asset base at all. If you can't dump them, diversify. Find friends whose idea of a good time is watching a film at home, baking or going to church.
Peer pressure is a major influence on how you spend money. If you want to progress, find friends that respect the fact that you are conservative with your money and that you don't want to go out and spend on a whim.
"Too many people spend money they haven't earned, to buy things they don't want, to impress people they don't like." Will Smith
For 2 years until early 2014 I wrote a weekly personal finance and business column for Malawi's leading media house, The Times Group. The target is middle-class, working African women.
This is a reproduction of the articles that appeared in the weekend edition of Malawi News.