We’re programmed to fail financially. That doesn’t stop us from slaving away every day to make enough money to pay this month’s bills. The reality is harsh, however. Only 1 person in every 100 will retire comfortably. Only 4 business start-ups in every 100 will survive the first 10 years. In fact, the odds against us failing are as high as 160 to 1.

It starts from kindergarten. We’re not taught about money in any course in our schooling system – from grade 0 to grade 12 – nor are we taught about it at Varsity. Of course we can study Economics, or Business Economics, but these are dry theoretical subjects that don’t teach you about cash and how to use it. [Apologies to our economist friends – but are these people the soul of any party?]

As I write this it occurs to me that the only place that I ever learnt about cash [it’s history, it’s meaning, it’s future] was when studying for a diploma in banking in 1979! And even then the course didn’t offer any assistance in budgeting for cash or investing for its growth. Why are the odds 160 to 1 against us being personally financially successful?

Simple really – we each spend more than 160 hours per month working to earn money – but then spend less than 1 hour per month looking after what we’ve already earned! That’s insane!

My personal recipe for doubling the chances of my personal financial success is extremely simple. Spend more time looking after what I already have. After all, I can double my chances by spending just 1 more hour per month [bringing the total up to 2 hours] and the lost hour is hardly going to impact on my income earning capacity, is it?

One of the interesting things about being a business voyeur [often also known as a consultant] is that you get to see all the stupid things other people do and relate them to all the stupid things you have done!. Why is it that we individual business owners believe that we can out-negotiate a banker when we handle maybe 2 such negotiations each year, while the banker handles 2 before his tea-break on any given day? And why is it that we, who know nothing about money, don’t invest any time in learning about it? How can we whine when we get screwed by those folk professing to look after our money?

I never fail to be amazed by folk who abrogate their financial obligations to an insurance policy, sold to them 40 years ago by a person whom they didn’t trust, and which they haven’t analysed once since they started the investment. Yet when they retire and the policy pays out just enough for a full meal at MacDonalds they feel cheated. Why?

The measure of our success in business, as in most of life, is money. It’s the scoring mechanism. Yet most of us know next to nothing about it. [Practical advice follows a little later, I hope.] Cash – a word derived from the Chinese – is a fascinating subject. What other single thing carries such emotional content. If you have no cash today, [March 14th] the month looms long and arduous, and this lack of cash is going to influence the way you feel more than any other thing. But if your pockets are full and jingly, you feel great and confident. And your full and jingly pockets might still be equal to someone else’s poverty. Money [or the lack thereof] is a factor in most suicides and divorces. When last did you see a rich, happy fellow end it all?

Maybe the problem is that the payment of this month’s bills is such an exciting activity? Not exciting in the sense of Ratanga Junction, but exciting in the sense of impending doom. So this task occupies our every waking moment and we simply don’t think about the future. After all, the future is still so far away. We get so engrossed in making our business efforts successful that we forget about the life behind us. In effect, what most of us do [and what you’ve done if you’ve ever signed a surety for an overdraft] is try to prosper our businesses, but we impoverish ourselves personally in the process. Honestly, how can you be going forward if you sign away the family home to borrow R30,000 on overdraft? I am not going to get started on that subject because we cover it in depth in the CrashProof your Business seminar. I am also not going to give you some broad advice on how to be personally financially successful – because your current circumstances [age, net worth, income, savings ethic] is unique to who you are.

But may I share a few ideas that I am working with right now? Firstly, understand money. I am now reading everything and anything I can about money – why it works, what it is, and how financial systems work. That may be boring – but if that’s what the scoring system is I’d like to know it. And the more I learn, the more I am prepared for stuff. Below are a few of the books I have read recently – available at Exclusive Books, or click on any to go to Amazon:

The Richest Man in Babylon - George S. Clason [Simple, easy to read]
Think and Grow Rich - Napoleon Hill [Simple, easy to read]
9 Steps to Financial Freedom - Suze Orman [Needs a little more thought]
The Pound - David Sinclair [A fascinating biography of the pound]
The Real Meaning of Money - Dorothy Rowe [Meatier reading]

Secondly, if I can’t understand how a particular investment works I say No. No matter how attractive it looks. My goal is simple. I want my savings to beat inflation by 5%. Boring really. But if I can manage to do that I will have enough to survive until the age of 90. [Which seems to be better than most folk are planning.]

Thirdly, focus on this issue for at least 2 hours each month. How did the savings do this month? What’s changed in the financial firmament – tax, interest rates, exchange rates? How is the rand doing against other currencies?

Lastly, stick to the plan! Don’t use the money for anything else. Hide it away where I can see it and control it but not spend it. This article was inspired by the woman of my dreams asking me to explain how she could have enough to retire on. So I created a tiny spreadsheet that calculated the effect of a monthly amount saved, combined with a few assumptions on savings rates, tax rates, inflation rates, and the monthly amount she wanted to draw when retired. Very sobering, but also very heartening.

It’s still pretty basic, but if you’d like a free copy [with a neat graph that shows when the money runs out] please go to www.petesweekly.co.za and click on the button at then end of the article. [This article is repeated on the front page and the button is at the bottom.] Instead of waiting until it’s perfect [which will never happen] you can mess with it to suit your needs. It’s in Excel 2000 [part of Office 2000] so please don’t try and run it in any other application!

Almost everyone I speak to says that they leave this stuff to their broker or financial advisor. That’s really a bad thing to do. There are a few things in life you have to do yourself – money is one of them.

Which brings me to something else of interest. 99% of us choose our financial advisor based on his/her personality – not on his/her financial performance! 75% of us never get a second opinion on any investment decision. Is it any wonder we end up old and screwed.

Let’s stop whining about it – let’s fix it.

© Peter Carruthers, www.petesweekly.co.za

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