Via the Grapevine – Financial issues/Questions

 

Grapevine

Happy Workers day! Hope you enjoy the fruits of your labour!

Yesterday brought a wave of relief as the government announced a relaxation on the lock down rules. This means that life will be a little normal from Tuesday, although a few things are expected from us such as wearing masks in public as well as adhering to the overarching regulations of the state of emergency in the country that is expected to be in force until September 2020. I continue to pray that we are safe during this unprecedented times.

Back to our financial gossip of the week.

Most people often ask that they would like to start earning an extra income , would like to start a business of some sort but either do not know where to start or do not have the money or claim not to have the time. Unfortunately the only way to know whether an idea will make you money or not is to try it.

Sometimes last year I wrote an article about starting a side hustle and  also ran a a few episodes of The Wave , were I covered young Namibians making their stride as entrepreneurs. The aim of this was to inspire others to join the movement.

So what is the secrete to starting a business?  What businesses are ideal to start? When is the good time to start a business? How much money do you need to commence a business? Do you need to register a company before you can start trading ?  The list of questions can go on but the overriding answer to this is ” It all depends”.

While it depends on many macro economic factors that are beyond ones control such as the economic condition at the time to other personal factors that can be changed for example access to capital as well as skills, there are a few things in common that all entrepreneurs have that might help you to start a business off in the right direction.

In no particular order of importance, here are my few tips if you would like to start a business:

  1. Unless you execute that idea, it will remain just that- an idea. I personally have a quest for trying out new business idea. Some proved to be really challenging than I initially thought, others a breeze. Some made me money others, I lost! In the end the lesson learnt is either used to improve on the original idea or better the next  idea.
  2. You do not essentially need money before you begin a business. Just start the idea that match what you have. Some ideas literary start by volunteering until you gain insight in the industry, possibly start earning a commission or something and then you upgrade from there. Many people delay their idea simply because they want bank financing. You can start running a small business, grow it and pave your way to getting the funding you need for the big idea.
  3. You will make a loss or break even in the first few months but that is not a reason to quit.
  4. Join an industry that you are interested in or keen to learn. Just like with anything you need knowledge for without it, you will perish. You  need to know the ups and downs and the dos and don’ts for that industry . At the moment we are exploring venturing in fishing but barely know much hence building relationships and learning from those who are in the industry is key.
  5. Your pricing is no secrete and hence stop asking people to DM for prices. Also do not sell something at N$XX just because everyone else is doing so. Match your output to input cost and add a reasonable margin

That and many more are what will get you started. But the real deal is just do it, you will figure it out as you go and if you can, do it with your own money ( Not the bank’s).

Stay safe

Dhalondoka

 

Celebrate your financial milestones

1-housingaffor

Today marks exactly 14 installments on my home loan payments. A little over a year ago now, I made the most importance decision of my life by taking on the second debt . The first I took out was to enable me to pay a rental deposit ( N$2000) in my first year of working and the second  debt is taking out the home loan.

Since then, I have been on a personal journey to learn about financial freedom and how to achieve that and  the most common hinderance to this  is debt for many. Many people take out debt they cannot afford but are at least able to service them and hence are trapped in this cycle of debt for a long period of time. Knowing this, I set a person goal, which was to pay off my home loan in under 51 months.

I have written various articles on home loans and mistakes I made in this journey so if you stroll around my blog you will find tons of information on this. In the interest on transparency, my house costed  N$479  000. This is cheaper than an average property especially in an urban area due to the fact that I bought it directly from the municipality.

I was determined to shed off this debt very quickly such that I have been putting in extra money in the home loan ranging from a committed monthly installment over and above the normal installment, travel allowance money and any other lumpsum in the mean time. I kept a rough amortization schedule to track my progress in addition to viewing the balance on a  monthly basis.

Today as I made the top payment, I was actually surprised to see that I have now brought down this debt to under N$300 000.This to me is a key milestone on this journey,  it brought renewed optimism and also assisted to realized that where there is a will, there is a way.

Here is a few things that I have learn along a the way:

  • I gave myself a boost by covering my own lawyers fees. This is a N$19 000 that would have been added on my bond should I have not covered it cash and incur interest of prime plus one over the life time of the loan.
  • Debt is manageable if you take a level you can comfortably pay off within the reasonable period.
  • Having a budget definitely makes it easier to put in the extra money as when your income comes in, you will know what portion is reserved for that.
  • Learn to appreciate what you have so that you do not envy what others have. Since I moved in, I have not made any major improvements  other than buying a fridge and a washing machine when my cousin moved out.
  • I was initially given a high interest rate of prime plus one because I was new to the bank I got the loan with, no credit history with them or my previous banking which I was unhappy about. Now with the drop in repo rate, I am excited with the savings  as my rate dropped to 9%.

If I had not committed to this journey, I would have owed the bank  a whooping N$471 388. 44 on the 14th installment , which would have been only  an N$8 236 reduction in the original loan amount.

Cheers to this and many more on this journey! If you are contemplating undertaking on  this journey it is indeed doable. The aim is to get the debt to just below the N$200 000 in the next episode of this journey.

Until then, stay safe

Dhalondoka

 

 

Via the Grapevine – Financial issues/Questions

Grapevine

As we begin another week, I am excited to bring you a new series of financial gossip ( Maybe not gossip really). This is a series of questions that come in my inbox or received from people that I personally believe are not confined to the these particular individuals. The goal is to learn from each other’s mistake and questions;  and hopefully also spark a new level of conversations regarding financial matters. In as much as money problems are everywhere, people rarely do talk about them openly.

The most frequently asked question is ~ I have  this much XX and I want to know how to how to start investing and I do not know where to begin?

Although investing is one of the key things to start your financial freedom, I think its important to know that it is not the first step in financial freedom. Before you need to start knowing which investments options are available to you, you need to ensure that you understand the most basic concepts about money. You need to be able to  know the difference between income and expenses , assets and liabilities as well as different returns options available on various savings options.

Why this is critical to understand is because having the knowledge of basic  money management will assist you to avoid falling victim of getting rich quick investment schemes etc. Also , it is in the process of learning the basics that you start exploring what investing really is and what are the most basic investment skills.

Also going to investment brokers with that question, you are likely to end up with your money tied up in products you do not understand; that if you decide to quit at a later stage can cost you a lot in termination fees.

In a nutshell, although that is not the answer to the question, my plea to you is to really consider learning a few things about money first. Start budgeting and learn the art of sticking to the budget. Get to understand different savings goals and build up an good saving nest. Only after that, you will begin to understand the power of knowledge!

Stay Safe

Dhalondoka

 

Lockdown Financial Tip day 4

Corona Mess

As Namibians, we really have a lot to be grateful for. With the measures put in place by the government it appears as though we have managed to flatten the curve of new infections with the country’s positive cases remaining at 16 for the past 5 weeks. I really pray and hope that this stays like this forever!

During the lockdown, I spent sometime looking into at our financial status and one thing that caught my attention was the concept of the emergency savings. I published an article of  on this a while ago but simply put, it is having money saved for the a rainy day.

When I shuffled around our savings, looked at the our debt level, I came to a conclusion that should something really go wrong for us, the savings will at least be able to able to cover the mortgage payments for the next 2 years and some odd month. This is of course assuming that all of it goes toward paying for that and we somehow still manage to get some money to pay for other costs of living such as food, electricity etc.

With that said, it brings us to the final tip of the week:

If you cannot save enough in emergency savings, please consider taking out credit insurance.

I stumbled upon credit insurance most recently on a friend status and I am not sure a lot of people are aware of it. Credit insurance is a policy you take out with the bank , and you pay for it on a monthly basis on the premise that should you be unable to pay for your debt for a set period of time, the bank will cover you without re-possessing your asset.

Let us take an example to illustrated this:

A friend recently bought a car and took out a cover for N$36 000 with the bank. This was enough to cover her for a period of two years should she get retrenched or loose her income ( something beyond her control). What the bank then did, they added the value of the cover to the loan amount they advance to her and calculated the monthly premium on the capital amount inclusive of the credit insurance cover.

Had she not taken out the insurance, her premium would have N$223 cheaper on a monthly basis, meaning that her credit insurance is costing  N$233. Over the life time of the loan, she would pay the bank N$18 000 ( including interest charged ) for a cover of N$36 000. If she gets retrenched, she  will score to the value of the month that she is unable to pay for her car. However, if she does not get in that situation, she would loose out on her contribution. That is a the nature of insurance , you take a risk and if that event does not happen, you are not refunded.

I was then weighing the options whether its worth having credit insurance or just rather have enough in emergency savings. This really depends on your personal circumstances especially your financial standing. If you have lumpsum somewhere that you can access in case of an unforeseen event, then maybe having emergency savings is for you. If you do not want to have that stress on your mind, then credit insurance is the way to go.

Remember there is still a difference between credit insurance, life cover, normal car insurance etc. If you want me to cover in detail the different types of insurance or have a specific question on the above, please leave a comment below.

Remember to protect what will leave you bankrupt!

Love

Dhalondoka

 

Lockdown Financial Tip – Day 3

Corona Mess

Another bright and warm day. The desert was pretty angry at us toward the afternoon hours yesterday with sudden winds blowing in all direction. This morning its all calm again with almost no wind.

This day brings about positive news! We have another recovery in Namibia. That means God is hearing our prayers and we are on the right track to recovery.

As some of you guys might know, I am amongst the special breed of people this year , “the corona brides”. We have a wedding towards the end of the year and with the lock down, a few things are changing with the arrangements including putting on hold some activities planned as well as starting others earlier.

These events have brought a bit of emphasis to marriage preparations, ranging for WhatsApp calls and audios with married friends, watching videos on YouTube, reading books on etc. Some of the marriage preparations topics were quite familiar and easy to grasp such as handling your money together etc. So this do not require much of my time. Other topics were really foreign and which requires a change in mindset.

One of those foreign territory is understanding how my body works and learning about my fertility cycle. This was one of those things I last studied in grade 7 or 10 (God knows when) and I never even bothered understanding because I was convinced science was not even your first choice. So this has me trying to even understand the most basic things such as how long my menstrual cycle is ( I never counted since I grade 8, I just somehow relied on my body signs) to the most complicated topics of understanding ovulation cycles etc.

With that in mind, it brings me to our financial tip of the day :

Educate yourself about things – from money to science to social lifestyles to everything that catch your interest.

Maybe like me with my fertility issues, looking at your bank statement is one of those things that you never did. Do you even know what is the difference with transaction fees and monthly management fees? Do you understand what it means when tate Shiimi cuts the repo rate? Do you understand  the impact of the oil prices in America to the world? Do you ???

The list can go on and on. The point is educate yourself. Find that one area of your life you want to master and just do it.

Maybe you also caught feelings when people made jokes about the rest of us that were going on about the bright light the sky a few days ago. It’s now your moment to Explore.

Stay safe and stay relevant!

Love

Dhalondoka

Lockdown Financial Tip day 2

Corona Mess

As I write this, I am watching the South Africa president address the nation on the plans that are underway to help the country deal with the ripple  effect of the pandemic. He announced that the government has set aside R500 billion to be disbursed to companies, individuals and  parastatals. Of interest is the monthly grant that will be given to the individuals for a period of 6 months.  What this shows is that they are expecting the pandemic to last a bit longer and therefore in it for a long time.

Whilst this is not the case for us, we know very well that when South Africa sneeze, we catch the cold. Even though the number of cases in Namibia remain at 16, we cannot expect the economy to return to normal anytime soon. We need to be ready for what lies ahead. With that being said, below is our tip of the day.

Re-think your financial plan  and re-look at the your personal balance sheet.

Sometimes ago, I wrote about assessing your net worth and also introduced the topic of personal balance.

A financial plan is  your roadmap going forward with regards to your money matters, whilst your personal balance sheet is a stock take on how much assets you have & what liabilities you owe.

So take sometimes to re-look at your roadmap and see if you still want to continue with the same route or you would like to re-direct it elsewhere. Here is how a few friends and I charted ours in light of this:

  • For me – Honeymoon savings will probably not be a priority anymore. After all this, I will rethink twice before taking a plane so that will need to be diverted to a local destination or amount lowered as that will not likely to be immediately after the wedding.
  • For my one friend – she reached out to asked my advise on wanting to buy a ford ranger. After doing the math I could shed some light on her affordability assessment and the stability of her job and also her plans to start a family sometimes  in the near future. She concluded that she is indeed not really able to afford the car at the moment. She has also decided to maybe focus on building a flat on a plot she bought a while back so that she can move in there instead of waiting for bank financing for a big house.

This may sound minor or drastic but the point is to re-look your plan and see if there are any adjustments where necessary. You could get to a conclusion that life is all good and no changes necessary but you might be surprised a few things may require changes.

Until next time, stay safe!

Dhalondoka

 

 

 

 

 

Lock down Financial Tip 1

Corona Mess

As promised, this week will be doing series of tips that should essentially help you with these challenging and unprecedent times. The aim is that we are able to build reserves so that we are better off in future as we really do not know how long this pandemic is likely to last.

 Tip 1 – Save the excess in your budget and shift the resources productively.

As many of us are effectively working from home for a month now, there are changes in some of our living costs. We can expect a saving in some categories, whilst others are expected to go beyond the budgeted amounts. This is essentially when you should be doing a closer variance analysis ( read it here).   Here is a few examples:

  • Your electricity bills is likely to go up this month. This is because there are people at home 24 hours and most likely you make three meals a day, Lunch, breakfast and dinner. Unlike when you worked at the office, you did not make dinner all the time nor are you home for lunch. Personally, with the units left of my meter box to date, I might have to top up because its unlikely to reach month end. This is something I hardly do.
  • Your toilet papers, hand washing related items are also going to run low as you now spent the day at home. This is also because at the office, you use company’s supplies hence your usage rate of those is limited at the few hours you spend at home.
  • What you are likely to save on though, is money you normally spent on taxi or fuel to work, lunch money as well as outing with friends and family.

With that being said, you still need to be realistic on how to handle the over and under budgeted items. This include still cooking packed meals so that you do not cook three times a day but rather limit it to twice a day. If you have a proper lunch and proper dinner, you can settle for a light breakfast such as cereal or fruits.

In addition, the savings may exceed the extra spending, and in that case put aside the excess in your savings closer to pay day.

For many of us that did panic buying, remember the idea was to stock up so that you do not have to go to the shops unnecessarily. If you still have that food, you do not need to do grocery shopping come pay day. Be innovative and try to cook what is in your kitchen. Stay away from the shops around pay day as that is the time you are likely to go spend time in long ques and come into contact with people who could potentially risk you and your family’s health.

A dollar not spent, is a dollar save.

Keep safe

Dhalondoka