A FACE IN THE SUN
Moses Mukisa on Personal Finance
In the 42 days of lockdown, Robert Kabushenga (RK) is taking off time to run a daily mentorship program called #40DayMentor hosted on his Twitter spaces. In this episode he hosts Moses Mukisa (MM) to talk on Personal Finance
RK: How have you been?
MM: Been well. I got Covid19 and healed from it. When you throw a covid survivors party, remember to send me my invitation.
RK: This thing of money, you seem to have time tested principles relating to it, could you share with the listeners.
MM: It’s good to give a bit of a background. I studied architecture. I got into the market place and worked for 9 years but I had nothing to write home about. I attended a talk by Patrick Bitature and it hit me that I had no idea of how money works. I had already married my wife at that time and we had two children. That is all I had in my life. I had no asset. No nothing. I looked around among my friends and the story was not any different. We knew how to make the money and how to spend it. That is when I started reading about money. In the 18 years of school, they didn’t teach us even a single lesson on how to manage money even for 30 minutes. I started sharing with friends, I had the opportunity of leading a church and that is how we started. We started a movement which resulted into the writing of the Straight Forward Financial Growth (SFFG).
The first principle is about acquiring financial knowledge.
RK: What do you mean by financial knowledge?
MM: Money is the second topic widely written about after love. The principle is about reading or listening to people who know how money works. I usually tell people in the trainings that where you used to sit in class does not determine where you sit on the plane. It is one thing to acquire academic knowledge and different thing to acquire financial knowledge. The two ought to be addressed differently. If you succeed academically, you will be employed by those who succeeded financially.
2nd: Work hard and smart. You have to put in the work. There is no second way about it.
3rd: Manage your money. In Uganda this is like a financial pandemic. This is where many Ugandans are. It is where I was. Many people make the money but cannot explain where it goes.
RK: How does the lack of management of money manifest itself?
MM: In the days of slavery, the slave owner was responsible for the slave’s welfare; dressing them, feeding them, entertaining them and all other necessities. We are in 2021, take the example of someone who earns UGX 1M a month. If you go to church you take off UGX 100,000 as tithe, then rent of UGX 300000. What happens here is that the employer is the one paying your rent. You negotiate the rent for yourself. It is the employer’s money you pass on to the landlord. Your account is a transaction’s account. You are just a courier. A conduit.
So you have UGX 600,000 left. But you still have to plan for transport say at UGX 150,000. Still it’s the employer doing it. Then utilities, say UGX 100,000. Then food, apart from the lunch at work, you are spending UGX 150,000 (Here you are particular about the places you eat from). You still have shopping to do. Kampala is the party capital of East Africa. By the time you include money you spend on wedding contributions and concerts, you are already in negatives. Then you ask for advance. That’s where debt starts.
RK: When I was still a CEO, bankers would come to me complaining. My staff would take loans from the bank and agree to pay back monthly on the 30th. I would make sure that all staff salary was paid by 28th. The guys would then go and withdraw all the money via ATM by 29th. By the time the banks would go to collect their money, the account would be empty.
MM: We say that the only money which is yours is that which you save to invest. That is from the Richest Man in Babylon. There is something we talk about called the cwaiii principle. When you heat a dry pan on fire and then pour in water, it makes the cwaiii sound. That is how some people’s economies are. By the time money pours into their account, all they have left is vapour.
RK: I have to confess. That is how I used to be.
MM: One day I was telling a friend that money talks. In his defense he said, at least for you it talks, mine just waves at me from a distance before it gets to me. So you find someone having worked for 40 years but without any savings apart from the forced NSSF savings.
RK: Tell us about the 4th Principle.
MM: Make wise investments. If the money just sits on the account, it is losing value. Assuming you are saving it, invest it. And you have to make sure your investments are having a certain return on investment percentage per annum to rise above the inflationary rate and build your wealth.
RK: Are you saying you must put money in activities that will earn a certain percentage of that money in return. What you are saying is that in order for that money to keep value, that return should be higher than the rate of inflation eats away at the value of the money as it is. Is that what you are saying?
Mm: Yes. Exactly. Many people understand the idea but then get stuck when it comes to execution. It seems like in Kampala every time you talk about investment the only thing people think about is real estate; buy land and build rentals. So we seem stuck there like that is the only idea. I advise; of all your income, you should not be investing less than 20%. If you invest less than 20%, you will not manage your latter years. You will have a much harder life as a senior citizen.
RK: What do you mean?
MM: Its 20%. Let me give you an example from the bible. Pharaoh (Egypt) had a dream. 7 thin cows ate 7 fat cows and they remained thin. 7 thin stocks of wheat swallowed 7 fat ones and they remained thin. So he told all his people but they couldn’t get it. They brought a one Hebrew boy called Joseph. Joseph told Pharaoh these things mean one thing; there is going to be seven years of plenty and after that there’s going to be 7 years of scarcity. He didn’t stop there, he told him of what he should do. He told him that he should get a wise person who should gather 20% of all the grain in Egypt. And that 20% will sustain the country in times of scarcity. Pharaoh chose him to do it.
It was the time of plenty and people were willing to give it away for free, the seven years passed and the famine came. In those 7 years of famine, Pharaoh took over everything. They ran out of money. Then they gave him their cows. (Money is liquid asset and cows are movable assets). Then they gave away the land (fixed assets). Then they ran out of what to give, they offered themselves. They had their hands. As you grow older, you shouldn’t be moving back to your starting job. You don’t want to be 80 years old explaining to your 25 year old boss why you are late. That’s what happened to the Egyptians.
Imagine Kabushenga is going to live for 100 years.
You study for 20 years. You have 80 years left. Let’s divide those into two halves. The first 20 are from 20-60 and the other 60-100. What you do with your money between 20-60 will determine what you will do with yourself between 60-100. I have done a bit of social research, people who have not prepared for their retirement usually die after 5 years after work. It is not that their bodies have given way, they have just run out of resources. Because in the bumper years, they were spending all their money. Most people all they have is the NSSF savings. 98% of people who get that money lose it after 2 years. The first thing they do is to build a house in the village. What does that house have to do with that house but all your friends are in Kampala.
The real tough thing is that all your social contacts are gone and you do not have money to spend and you have to depend on your children. That is what stresses people. That is what stresses people. That is why I insist that not less than 20% should be invested.
RK: That should be for starters. Above 40 should be 40%.
MM: I have developed something called an investment scale. There are three kinds of investment:
Low risk, low return investments like real estate
Medium risk, medium return like treasury bills,
High risk, high return like business equity
I always tell people that 50-60% should be low risk, low return. 30-35% should be medium risk, medium return and only 10% should be high risk, high return.
Let me tell you a story.
There was something called forex trading. That is high risk, high return or no return. Some people liquidated all their real-estate and lost everything. If you only had 10%, you could have 90% to help you recover
RK: How do you distinguish high risk investment and gambling on good luck, betting and all things unscientific. Where do you draw the line?
MM: Betting is not an investment. You know it is an investment when you know how that value is gained. If you cannot explain how the value has come from, then it is a gamble.
RK: From experiences if the person talks a lot of English and you cannot understand, that is not a place to go.
MM: You have to understand how stuff works. The people think that someone is going think through for them. You should be reasonable enough to know how it so works.
Rk: Let me tell this to the ladies; if you are involved emotionally with somebody and he starts talking about investment when it is your money, you are at a great risk. Disappear.
Mm: I keep telling people that money and emotion should never mix. When they mix, very bad things happen.
RK: 5th Principle?
MM: Live generously
RK: What does that mean?
MM: I will approach it from a Christian point of view. You don’t have to be emotionally generous. I am generous with church through tithe (10%), then a percentage to other people. I teach people about the principle of honouring your parents if you have them, you must take care of them. They should never have to ask.
RK: I want to put this to you Moses, making money ethically. Many people think that the only way to be rich in this town is through quick sharp deals, what do say of that?
MM: First of all, that is a very poor approach to life. When you have defrauded people, you cannot build a nation like that. It’s like people who create extra lanes in traffic, have you ever wondered what if everyone started doing that? There is a very clear way of making money by solving problems. Money is a reward for solving problems.
RK: When you solve someone’s problem, then you will be rewarded with money,
MM: That is a sustainable way. I read a book that every bank note is a certificate of performance. That is how economies run. Someone said entrepreneurs are people who solve problems for a profit. The difference between the poor and wealthy people is that wealth people know how to convert their time into tangible resources. Time we all have. How much of each of your hours are you able to convert into cash; ethically, morally and financially.
Most people were told to go to school, get a good job and you will be paid for it. They know their employer will solve their problems. That is no longer viable, solve a problem.
RK: If there is any lesson you are taking away from this conversation, what problem exists that I can solve, is that what you are saying.
MM: Even if you are employed, look at your boss as a client. Then start doing what business people do for their customers. Look at them as a client who pays for your service.
RK: What else can people do to improve management of their money?
MM: One of the first things to do to improve on your management is using percentages. That takes away the emotions. For example 20% of your money goes to an account where preferably where you are not the only signatory. Robert Kiosaki teaches that plan for you money before it arrives. Because once the money arrives, you lose the capacity to think clearly.
2. Join spaces where you will be held accountable to contribute an amount. It could be a SACCO or an investment club. Make the loudest noise. Ask the hard questions.
Also have a separate account for investment. Don’t mix it with tomato money.
RK: Someone once advised that even the money left give it to your wife.
Hillary Bamulinde (HB), can you talk to Moses. I want to listen to the two of you speak.
MM: I have been reading your tweets, and I am glad you are here.
HB: Moses, could you touch on the perception among many young people that you should start saving in your 20s, people want to start saving in their 30s or 40s. If you get your retirement money and put your money in a business you have never run. I have seen my friends’ parents lose money when they get NSSF by putting it in a business they don’t know.
MM: Consistency compounds. The longer you take to start, the less safe you are when it comes to savings and investment. It may take you 17 years saving 20% of your income, your money will be making you the same money like you will be paid at work. If you start at 25, it means that at 45, you are good to go. If you start at 40, it may be harder for it to be making years later. Your money should be able to work for you early in life.
People think they will never grow older, they assume they will always be 25. It is usually when you hit 40 that it occurs to you. That is why we keep having funerals of people 2-5 years after work because they have not planned for the time after. .
HB: In my experience, I have dealt with many people. Guys who earn about UGX 500,000, are able to save more than people who earn more than UGX 1 million. If you can stay home longer at your parents’ house, do it, and save more. It is better a girlfriend leaves you early in life than live hand to mouth.
MM: One person I was coaching was shocked that guys with blue collar jobs had rentals but the white collar ones only had debts. The blue collar guys used to call their colleagues bapangisa.
Comrade Otoa: earlier when you were tweeting, you talked about emergencies, how you deal with behavioural change as an individual or a people. You also talked about flying with eagles, can you talk about it.
MM: The quality of people you keep around will determine the kind of person you become. There are people who scare you. Examine your current circle of friends to see who can hold you accountable. John Maxwell says if you are always on top of the class, then you are in the wrong class. It does not make sense to be the best in P3 for five years. You would rather be the 50th when you’re progressing.
On emergency: for the individual, there are 4 things.
Be an earned person. Earn extra skills. The person at the work place who does more than one thing will stay longer. Know something extra at your work place.
Become a quicker person. In Uganda, people are always trying to be as slow as they can as long as they are not being fired. Be the person who anticipates what is needed and when given an assignment turn it in at 70% of the time you have been using.
Become a leader. Let’s say Kabushenga has a team of 10, you start getting ahead of the game by mobilising the rest of team to do the task. Leadership is not about the position but rather who takes the responsibility.
Hassan Kibirango: About investment groups, we don’t have structures, they often run for a few years and die. Is there a way to formalise them.
MM: It is better to focus on a specific investment for a specific time which should not be more than five years. Achieve the goal and then move on. Not many people are disciplined for a long term.
Esther: Is it possible for someone starting a business to start and thrive in this pandemic?
RK: What is your main fear?
Esther: Will I make profit?
MM: It depends on the type of business. Covid or no Covid, don’t sell sand to Arabs. Just think. There are people making money right now. Think of the possibility not the obstacle.
Fiona Ssozi: You talked about percentage and reminded me about the jars, which one of the jars should you never touch?
MM: Don’t touch your investment money. Reduce your expenses. Soon, the time will be good enough for you to put it to good use.
Geoff Opio: Do we look at personal finance as a science or an art? When they are talking about building investments, many people look at “deals”, why should we call a corrupt person smart?
MM: Investment can be both a science and an art. It is a science because it has numbers. It is also an art because it involves people. You need to have good relationships with the people.
On deals: Whether it is true or not, you cannot prove it. There is no long term traction of generational wealth on how to make such deals. No one takes their child on a bank robbery errand. For purposes of long term investment, let’s make money the right way.
Kamikaze Agnes: In terms of personal finance, like john Maxwell says, budget is telling your money where to go instead of wondering where it went. That discipline of running on budget, it is easy to go off track, how’d you keep the consistency?
MM: Most people suffer with a detailed budget. Use a simple money management system. My wife and I came up with this simple money management system; 10 % to church, 20 % to investment, 20% to donations and 60 % is what we have to spend. Over time, you get to know how much you spend on home utilities.
Agnes Namyalo: On saving, I have had people say don’t save money in a bank where there are no benefits, buy shares, how can someone go about that?
MM: Always think both. If just keep money in the bank without using it has no value. And for you to invest you need saving. My friends and I save every week. Your saving account should be a collection place for money you are going to invest.
RK: Can you say something about bitocin
MM: It is like swimming around Bujagaali falls. Those who know what to do are doing it.
RK: I am completely and utterly grateful for you making time to talk us. Moses, thank you for giving our people something to think about. Something to help them to grow.
MM: Thank you for giving me this opportunity to share. The Bible says a live dog is better than a dead lion. Keep hope alive. For a person with a vision, tomorrow is better than yesterday. Don’t give up. Do not have a total isolation. Remain in touch with people and keep thriving.