Two weeks ago we were invited to attend the National Social Security Fund’s (NSSF) town hall meeting for potential savers and retirees. You guessed right if you know what we were going to talk about – money. Since we all love money, the house was full to the eaves. I spent my time listening and for sure discovered that listening is sometimes better than talking. Is it not why we have two ears and one mouth?
We were told that if we were saving less than 20% of our income, we were not saving enough for old age. Indeed most savers with NSSF were saving only 5% of their income with their employees topping up another 10%. After 30 or so years, these compulsory savers (with NSSF) had nothing to fall back on in retirement except the money they had been forced NOT to spend. Many hoped that this money would lead them unto economic salvation but unfortunately it was not having that effect. More than 90% of the NSSF savers spent their pot in the first year. And then again, only 7% had more than Ugx. 50 million saved up for retirement! Small wonder then that those who hoped that the NSSF held the key to financial freedom ended up worse than before retirement in three years’ time! There was also clamour by many participants to let them access their savings before the age of 55, but this was just inviting trouble as well because these savers knew next to nothing about running business.
As the presentations and discussion went on, I realized how financially illiterate most of us are. Allow me to share some very basis lessons about money that I picked that day. You never know when they may come in handy.
Lesson 1: there are no ‘money machines’. If they existed we would not have to work as we would all be rich. Money would become worthless as we manufactured more and more machines to make more and more money. The point here is that money is made carefully and slowly through grit, patience and resilience if you are an honest soul. So success is a marathon, run diligently and frugally. Work hard and save for when you will not be able to earn us much as today.
Lesson 2: if the ‘deal’ sounds too good to be true it’s most probably a ponzi scheme. Forget the get rich quick talk. Most people will capitalize on our instinctive and basic weakness of greed. They will sell you a fib about growing rich selling ‘black stone’ or ‘red mercury’ or gold for that matter. But before you can be part of the deal, you will have to part with your hard earned savings! You should ask why they want you to participate in such and such a deal if they are not rich themselves. It is akin to the witch doctor who sells ‘luck’ to get rich. First ask why he/she lives in mud and wattle heap before you buy those luck charms!
Lesson 3: Your ‘outgo’ should never exceed your income. The money making process is an inverted funnel. Money comes in slowly and drains out very fast. That’s where the saying that there is much more ‘month left after the money’ comes from I guess. Try and block the drains if you want have some left after the month is over. Manage you expenditure and all else will fall in place
Lesson 4: risk is not necessarily a bad thing and there can be no return without risk. Thus risk should be managed than wished away. There are scientific ways of managing it and even profiting from risk. Juts make sure you ask a specialist and not your granny.
Lesson 5: it’s never too late to start saving. According to one wise sage: compound interest is the eighth wonder of the world; he who understands it earns it, he who does not, pays it.
Samuel Sejjaaka is Country Team Leader at Abacus Business School. Twitter @samuelsejjaaka