2015 STOCK TAKE : PERSONAL FINANCIAL MANAGEMENT

No matter how much we try to sugar-coat it, “Money is to society as the heart is to the human body”. Many a times you hear people say, money alone cannot bring happiness; try taking out the money from the equation (statement) and tell me if there is a slight shot at happiness without money.
This is why a stock take of the previous year cannot be complete without looking at MONEY issues that affect us personally, hence the term Personal Finance. Life is all about buying and selling – from birth your parents bought the services of a doctor, later on the services of a teacher, more doctors, taxi drivers, food sellers etc. This happens right up to the day you die – the services of the hospital (morgue) will be bought again and when you are laid to rest, the services of grave diggers will be bought. And there is always more buying than selling from a personal perspective. When you buy, you use up money, when you sell (through offering your skills in a job, or a business), you receive money. It is therefore very important to properly manage this process of buying and selling from a personal perspective; else you could take an entire month to earn (receive) say 200,000 XAF and use a few hours to spend it (buy with it). During 2015, I observed quite a number of cases of personal buying and selling and noted that one item stands out – ALCOHOL.
The Buying Of Alcohol
In 2013 I did a high level calculation using the published revenue (2012 figures) figures of the brewery giant in Cameroon and noted that on average it appears Cameroonians spend up to 40% of their income on alcohol related products. I assume that this situation was still prevalent in 2015. And it is very worrying considering that income levels are already considered low in the economy. Based on my observation from the few events that have been hosted in my business premises during 2015, alcohol consumes about 50-70% of most of the event budgets. If you attended or were involved in the planning of any occasion (burial, wedding, church baptism etc.) during 2015, take a moment and try to reflect on how much was spent on alcohol and other items.
Do not get me wrong, ALCOHOL is definitely a good thing as it is used to celebrate life. But in excess it has a huge negative impact on individuals – first it cost a fortune (you will have too little money left to buy other things that are needed in life), and secondly it could pose serious health and societal problems.
Sometime in mid-2015, I was driving into the University of Bamenda to present lectures. The time was 7am and the location was the stretch of road that leads into the main campus building in Bambili (as you turn left from the main road leading to Ndop). I saw a group of students seated at a bar along the road with numerous beer bottles in front of them. I took a serious look at them, and one of them waved at me with a smile. This scene made my heart to almost fall out of my chest.
NB: Some people overspend or over buy some other items other than alcohol. These other items could include: gambling, cigarettes, shoes/clothes, etc. This is also a display of poor personal financial management and needs to be ameliorated.
Overconfidence – An Important Behavioral Bias Worth Keeping In Check.
Overconfidence is a concept I experienced in 2015 which I am very tempted to share as I believe it plays a vital role in the lives of many Cameroonians (maybe Africans as a whole).
Do you remember the song by Lapiro de banga with the line “Over don na mbout” ? Do you know what this phrase means?
The following quotations will set the theoretical basis for my discussion on overconfidence within the Cameroon context.
In its most basic form, overconfidence can be summarized as unwarranted faith in one’s intuitive reasoning, judgments, and cognitive abilities. Pompian (2006)
Too many people overvalue what they are not and undervalue what they are.
—Malcolm S. Forbes
In 2015 I was given a golden opportunity to present a course titled - Bahavioral Finance to some masters’ students at the University of Bamenda. This exposed me to the concept of overconfidence, which I think is similar to what the popular artist Lapiro de Mbanga sang about.
I have mentioned above that life is about buying and selling and this process needs to be managed carefully. The decision to buy or sell anything is a crucial decision and cannot be based on any biases or rules of thumb; because as we all know the decision will create an outflow or inflow of the most important element of life – MONEY. The following questions should help illustrate and explain practical circumstances where overconfidence is at play:
1. Do you usually argue or debate on topics that you actually know about, and use facts and evidence that you are absolutely certain of?
2. Do you often question your past actions? Are you open to the idea that you could have acted wrongly? And do you actually confess it and make amends?
3. If your parents had a poultry when you were young (say 10 years old), and you helped clean the poultry and fed the fowls occasionally. Do you agree that this does not make you an expert in fowl raring?
4. Do you usually consult someone that you believe is more knowledgeable on something before you make a decision?
5. Do you think it incorrect to make conclusions about people or situations based on assumptions (or unrelated past experiences)?
If you answered any question in the negative, then you might want to consider checking your overconfidence level.
Sometimes mediocracy and lack of skills is fuelled by this deep false believe of “I know it well”. If you think and believe you know it too well, then you will not learn anything new or even identify or accept new information. Sometimes I am blown away with the kind of excuses that some employees in my company make when they fall short on performance; the sentence “I did my best” is always echoed. And I will always reply with the following question “are you sure your best was good enough?” This is where the conversation usually ends.
Overconfidence is a nice way of describing arrogance and this is a very serious issue in our society. No one wants to take advice from anyone. The consequence of this is that many Cameroonians are unable to work together. How do you expect three employees who believe that they “know it all” and are the best, to listen to each other and agree on a course of action? I have watched groups of Cameroonians play football many a times in 2015 and noticed that everyone on the pitch was a player and a coach at the same time. Everyone was telling everyone how to play. Something similar appeared to have happened at the national football team level – why will two players from the same team fight with each other during an international game? I can only conclude that due to overconfidence amongst Cameroonians there is a serious lack of collaboration. This is a serious barrier to economic growth. No doubt most of the businesses in Cameroon are single owner entities, operated in an informal fashion. It will always take many hands to tie big bundles.
I have friends who have told me that I am wasting my time as a consultant within the Cameroonian economy because everyone “knows it all”. But somehow I am more motivated to establish a platform that provides relevant and vital information to Cameroonians because the level of ignorance and “over don” in our country is shocking. It is impossible for everyone to know everything; so when a people exhibit the “I know it all” attitude on everything it might just mean that the people don’t know that they do not know anything. Hence the huge levels of IGNIORANCE and MEDIOCRACY in our economy.
This is why I prescribe relevant education so that people can develop skills and become experts in a specific sector/field from which they will be able to make valuable contributions to the economy/society while allowing others the room to do same in other sectors or fields.
CONCLUSION
To enjoy life you need to be able to buy a lot of services and products. There is always going to be a lot less money available to you to buy all you need at any given time. You therefore need to be able to draw up a priority list of things that you need to buy and compare this with the available funds (money). I suggest you put alcohol at the bottom of the list going forward. If you are already doing so, great but please help educate your friends and loved ones to do same.
Be humble in your personal affairs and make sure that before you take a decision that eventually leads to in/out flow of money, all relevant information is considered. Do not act based on the feeling of “I know it too well”. Seek help from professionals when need be and if possible seek a second opinion from another professional before making big decisions. 25-45 Business Consulting SA is one of the professional companies that can help you with your financial decisions.
Part 3 will look at the diaspora (bushfallers) and the Cameroon economy.
Collins Mazu,
CEO
25-45 Business Consulting SA – a proudly Cameroonian company.