Tuesday 28 March 2017 Building Personal Wealth

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Seven money musts for 2017BUILDINGPERSONALWEALTH

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•NDAMANAKASHOLE

CERTIFIED Financial Planner and managing member of financial planning firm, Chase & Associates, Afra Schimming-Chase says believing that days are hard actually makes the days harder.

Beliveing that days are hard can also make some people to start beliveing that circumstatnces are responsible for their financial lives, she said. “My take is that we are ultimately respon-sible for how our financial matters look,” Afra Schimming-Chase told The Namibian in an interview.

She added that there is nothing individuals can do about the weather (note how long the drought lasted and eventually the rains came) inasmuch as citizens have little control over the economy.

“Focus on where you can make a difference, be mindful of what you give your attention to, and use this time to put those things in place that will make surviving during challeng-ing times as bearable as possible,” she added.

Since every individual has different wants and most people have the same generic needs which include water, shelter, clothing, etc., Schimming-Chase advised that it is time to go back to basics.

“Now is the time to keep luxuries to a minimum, look for ways in which to reduce spending such as keeping a daily journal of spending, look for ways to save and rebuild cash reserves for hard times ahead,” she said.

She further cautioned against get-ting into any unnecessary debt now, including buying consumer items on credit as one may end up paying far more than what the item is worth in the first place.

“To take from the minister of fi-nance’s budget speech, it is time to apply austerity measures to our own budgets, focus on core expenditure and tighten the belt for now,” she said.

For those individuals who have consistently been living within their means, the current economic situa-tion is simply what is happening at the moment, she said.

For those who have been operating on every cent they earn and more, these times are quite trying.

“Some face repossession of luxury items due to non-payment. In the housing market, home owners seek-

TOUGHDAYS ... An illustration photo shows the N$10, N$20 and coins.

Photo: Contibuted

Afra Schimming-Chase

Believing days are hard makes days harder

ing to sell are seeing their proper-ties staying on the market longer than usual while they need to make mortgage repayments. In other cases, rentals are not being taken up or have become unaffordable for tenants.

“All in all, there is great value in this situation because it is forcing many to go back to the foundation, review their finances, ensure that they create minimum cash reserves and remain empowered in their financial decision making,” she said.

She added that she has seen people become rather creative and innova-tive in finding ways to spend less, share more with others thus reducing the burden on themselves.

“This is a great time to review your budget, have a look at key spending items monthly and zone in on reducing unnecessary spending,” she advised.

“Consider areas where you can control spending, for example look for water and electricity saving meas-ures, check debt repayments and see where you can pay more to reduce the overall levels of debt should interest

rates go up and impact debt repay-ments negatively,” she said.

She further advised consumers to guard against taking unnecessary debt at this time, hold off on financial decisions that would create a greater burden on income right now.

She advised that consumers start putting something towards an emer-gency fund regularly, and it is not about how much they save, it is that they actually save. She added that a little bit becomes a lot over time, and that now is a good time to get started.

“If you need support, create a sav-ings club with friends or like-minded individuals, or find an accountability partner and check in regularly to see how close to your savings goals you get,” she said.

She further advised that consumers spend more time at home with family, cook and eat together as opposed to eating out.

“Cut excessive spending like DStv, clothing accounts and such. Use that time for quality time, reading, exercising, spring cleaning, getting back to what really matters.,” she

said, adding that car-pooling with neighbours could be a method to reduce transport costs. There could be other ways of reducing transport costs too.

“There is so much one can do to adjust to tough economic times as this is when we learn the true value of holding back in good times to ensure that we have a little something to tide us over in bad times. Learn the les-sons here and now to not be caught with your pants down the next time the economy dips or inflation rises.

Give yourself the power of choice,” she advised.

Schimming-Chase added that there is no smooth road to financial plan-ning and as in life, there are ups and downs, peaks and valleys.

“Focus your mindset on what mat-ters, keep your eyes on your goals and your financial vision, use this time to create cushioning for the next time. This is a great time to put your finances in order, something we often neglect doing in good times,” she said.

Photo: Walter Kariko

Photo: Walter Kariko

PAYDAY ... A bank client withdraws money from an ATM in Windhoek West, yesterday.

2Tuesday 28 March 2017 Building Personal Wealth

Strategies of surviving tough economic times• NDAMA NAKASHOLE has compiled some relevant tips for households to survive a tough economic/financial year, from Investopedia, Money Marketing and Secrets of Survival.

WHEN economic times turn tough, governments urge their citizens to spend prudently. The global eco-nomic challenges which did not spare Namibia, resulted in finance minister Calle Schlettwein appealing to Na-mibians not to borrow beyond their ability to repay their loans.

Schlettwein told The Namibian at the time that as the new year had just begun and the joyful season finished with its large spending tradition that debt is constantly haunting the major-ity of Namibians as they sink deeper into the predicament of loan sharks to have a comfortable January.

However economist Milner Sibole-ka told The Namibian in an interview in December that there is need to increase government spending to reverse the recession and keep the economy afloat.

Last month, economic planning minister Tom Alweendo reiterated that Namibians need to be part of the change being made to solve the country’s economic problems.

“Sometimes, it is a painful change, but if we all take part in that change, we will all be winners. We have to align the way we spend. The point is not to act as if nothing was wrong,” the minister noted.

1. Do not buy what you cannot afford

We all want that designer sweater, leather handbag, or cute sports car, but most of us just cannot afford to make those purchases. There is a simple solution to this dilemma. If you cannot afford it, do not buy it. This is often the easiest point to understand, but it is one of the hardest to implement when all those goodies are staring you in the face and all your credit companies are telling you it is OK.

2. If you cannot pay cash, you probably cannot afford it

In our credit crazy world, amass-ing debt no longer carries a social stigma. Everybody has a car loan repayment, a house mortgage re-payment and credit card payments. Well, remember what your mother said about everybody jumping off a bridge? Just because “everybody” is doing it, does not make it a good idea. Buying something you cannot afford now, especially when the economy is unsettled, can double the pain of pay-ing later. For example, if you purchase an N$800 000 home today and the market goes into a slump and deval-ues your home by N$$200 000, you will be paying the bank twice what the home has come to be worth. Just because it was easy to get the credit to buy that home, does not mean it was the right time for you to buy it.

3. If you are in debt, stop spend-ing money

Sometimes, such as when purchas-ing a home, the cost of the item is so great that you simply cannot afford to pay cash. This should be the exception rather than the rule. When it cannot be avoided, you need to close your purse and stop spending. Getting yourself further in debt doesn’t help your financial situation. Making a realistic budget in this case is the key to success. Once you know how much you’re actually spending on those daily trips to the grocery store and coffee shop, you’ll be able to find room to cut costs realistically.

4. Do not count on somebody else to save you

In times of economic uncertainty, people often think the government

SAVING YOU MONEY ... Offered by almost all banks in the country, cellphone banking services allow you to do banking from anywhere using your mobile handsets to buy prepaid cellphone airtime, request account balances, obtain mini-

statements, transfer money between accounts, make beneficiary payments, send e-money, pay accounts and others. This not only saves you time, but money too as this offerings are usually done at no cost.

will be able to help them, but unfor-tunately this is often the time when government has the least amount of money and freedom to help its own citizens. In most cases, government will not save you, so you will have to save yourself.

5. Can you bring home more bacon?

While dwindling finances can motivate us to change a lifetime of poor spending habits, we should also consider additional ways that can start bringing in more money, residually.

6. Sell the SUVRegarding transportation, this is a

tougher area to save money on ini-tially. Most of us need to work and that means we have career needs. But, the fact is, with some brainstorming and goal setting (and prayers to God for new doors to open in your life), you may find work right in your own com-munity, without having to make that daily commute in traffic that drives up what you pay each month in fuel.

7. Look towards the futureIn order to avoid falling off the path

of financial discipline, you should set out clear long-term goals to keep in your mind’s eye as you make deci-sions throughout the year. Putting goals in place such as saving towards a child’s education, a home or retire-ment will help you stay focussed and prevent you from being tempted off your path by unnecessary spending. You will also then be able to look into specific investment products that are best suited to you and what you need for your individual financial journey.

Calle Schlettwein

Tom Alweendo

Milner Siboleka

To avoid overspendingand high debt, it's importantto create a realistic budget

which you can actually stick to.

If need be create an envelopefor each of your expenses

to better monitoryour spending.

Remember:You don’t need any

diplomas or degrees to become an expert at

managing yourown finances.

Start managing yourown finances today!

Don’t worry about what others think!

Never buy things to impress other people. Keep your finances on track, focus

on your needs and not the wants.

Photo: Ndama Nakashole

3Tuesday 28 March 2017 Building Personal Wealth

•STAFFREPORTER

WHAT is financial independence, and what are the responsibilities that come with it? That is the question one needs to ask when financial responsibility beckons and independence rests only with you.

Your road to financial independence

It appears that many people talk about becoming financially independent one day, but few really understand what this means. Some of us may have a mental image of ourselves going on a shopping spree, or buying that sought-after luxury item, while others are happy to travel to their favourite holiday destination with no wor-ries whatsoever.

Yet, before you arrive at this destination of be-ing financially independ-ent, you have to have a well-compiled plan to manage your money and build up your savings.

Surihe Gaomas-Gu-chu, PR and commu-nications manager of Standard Bank, has some tips to help you on that journey.

1. The first tip is to always pay yourself first

Decide what you can save every month, and make sure that this money is put away. Have a debit order that automatically moves the money to an-other account. As your salary grows, so the amount saved should increase. This way, you keep pace with inflation, and your money retains value.

2. The second tip is to learn the magic of compound interest

A basic rule with sav-ings accounts is that the more money you save and the longer you leave it in the account, the more interest you can earn. An important attraction of a savings account is that if money is left in the account and monthly interest earned is paid into the account, you start earning inter-est on interest, creating a compounding effect. When you begin to earn interest on your interest, it is astonishing how quickly money grows and accumulates.

3. The third tip is to develop a savings habit, and look to your future

Decide what your short, medium and long-term financial goals are, and start working towards them. For your long-term goals, you may want to consult with a qualified financial planner to better understand your savings and investment options. But, whatever your goal, it is important to create a habit of saving regularly, and to stick to it!

4. The fourth tip is to control debt

Work out a budget, and then stick to it. Avoid the temptation of opening a number of credit accounts because small amounts add up quickly and can gobble up a salary, which can land you in trouble. Consider purchases carefully.

“The sooner you take action, the better. Once a savings habit is part of your everyday life, it is easy to con-tinue. The rewards, a life where you control money and money doesn’t control you, are worth the effort,” advised Gaomas-Guchu. Surihe Gaomas-Guchu

The sooner you take action, the better. Once a savings habit is part of your everyday life, it is easy to continue. The rewards, a life where you control money and money doesn’t control you, are worth the effort.– Surihe Gaomas-Guchu

Mission: To improve the welfare of our members and beneficiaries by providing comprehensive social protection.Vision: To be the preferred provider of comprehensive social protection in Namibia.

Q: What is the overall state of corporate governance at the Social Security Commission?

A: Corporate governance has improved significantly at the SSC, but we still have a lot of work to do. Yes, our organizational culture has its shortcomings and lags behind what is needed for the smooth running of a professional and sustainable outfit, delivering productive and effective services. We recognize where our internal controls, processes and mindsets need improvement and have a single-minded focus on delivering that improvement. As anyone who has been involved in significant change management will tell you, this is a process and a journey, not an event. This journey is what we are busy with and we have made significant progress in this regard.

The progress that we have made on the governance front has been substantial over the last 18 months. In July 2016, we appointed a substantive Executive Officer, filled 6 of 8 vacant roles reporting to the Executive Officer and put in place a comprehensive performance contract for the Executive Officer and her direct reports. The Commissioners and Executive Management collectively crafted a Corporate Strategy – Business and Financial Plan - which was submitted to the Portfolio Minister. The Line Minister consulted both the Minister of Finance and Minister of Public Enterprises on the strategic plan and budget we have submitted and these were approved in March 2017 when our financial year commenced. We finalised a customer value proposition, a people strategy and also approved a comprehensive risk management framework. Our governance interventions have not been limited to organizational changes but extend to our members as well. In January 2016, we significantly improved Maternity, Sickness and Death Benefits for our members without any increase in member or employer contributions. These were increased from N$10,000 to N$13,000 for maternity benefits, death benefits from N$5, 515 to N$8,475 and sick leave benefits were increased by 24% to a maximum of N$9, 750 for the first 12 months. Additionally, we submitted a recommendation to the Line Minister to improve Maternity Leave from 12 to 14 weeks as per the ILO recommendation. We will continue this focus on our members, and in this same vein, next we plan to tackle the ceiling on maternity benefits which are not fair towards women earning more than the SSC capped benefits.

Q: There are reports that the SSC overpaid on properties recently acquired and did not follow due process.

A: These allegations are devoid of all truth and deliberately inaccurate. The core business of the SSC is to provide the social security needs of and pay claims to Namibians. We reviewed the property portfolio and subsequently approved a property strategy that is better aligned to SSC’s core goals and appointed appropriate resources to execute this strategy. Primarily, while we retained office projects since these are required for our functioning, we reviewed these to ultimately obtain a 50% cost-saving from the previous plan and eliminated the plans to develop retail centers, which are not aligned to our core function. Consider the following facts:

1. Before we joined, the SSC acquired a plot for N$47m

measuring along Independence Avenue in Windhoek to build a Head Office and for retail purposes. The acquisition of the plot plus excavations costs N$85 million. The total estimated costs for this project was between N$800m and N$1billion, which was almost a third of the total assets of the SSC. The proposal on the table was to finance the project entirely from internal funds. We have stopped this for 3 reasons: There was no Ministerial approval for the expenditure; there was no need to go into retail property space; and thirdly, this could have compromised the financial position of the institution and create liquidity and solvency problems. The SSC is disposing this plot together with excavations and we have received offers in excess of the amount spent so far on the project. Instead, we opted to buy 3 adjacent properties measuring more than 3000 sqm at a total average costs of around N$11,000 per square meter on Hosea Kutako Drive. We plan to consolidate these and approved a plan to put up a Head Office of around N$420 million. Senior management from The Ministry of Labour was part of the team who viewed two of the properties and supported the acquisition of the plots. There was an independent valuation done for all plots and submissions made to the Board for approval. So, a total project of around N$1billion was reduced to N$450 million.

2. In Otjiwarongo, the SSC acquired 3 plots to construct offices and a shopping centre costing about N$48 million. We halted this and instead approved a budget for offices only costing N$14 million.

3. In Keetmanshoop, the SSC owns a building and planned to renovate this building for offices and retail space for close to N$50 million. Again, we halted this and instead approved an office renovations only for about N$13 million.

The end result is we have reduced the total planned property expenditure by 50% from more than N$1.1 billion to approximately N$450 million by deciding not to go into developing shopping centers and agreeing to rent in towns should there be an operational need for expansion, where we do not own properties or plots. A potential saving of more than N$650 million.

Q: You also placed N$150 million with the SME Bank where your Executive Officer is a Board member. What is your comment on this conflict of interest?

More than 75% of the SSC funds are managed by external managers. The remaining 25% is managed in-house to pay claims and for working capital purposes.

Our investments are approved by the Investment Committee and all these investments with the SME, which are term deposits have been approved by the Investment Committee. Mrs Mungunda recused herself from the process of investing with the SME Bank and also declared her directorship of the Bank.

Q: When are you rolling out the National Pension Fund (NPF)?

A: The NPF has been on the Namibian Statutes since 1994 and is part of the Harambee Prosperity Plan. The members

Recently, there has been a spate of publicity negatively characterizing the SSC, its governance and recent transactions. As a public corporation and a steward of public money, we believe that we owe the Namibian people a transparent and robust refutation that corrects the record, clarifies our stewardship of public money, and assures the public of our unwavering commitment to our mission to be a world-class provider of social security benefits to the Namibian workforce and other beneficiaries.

SSC sets the record straight

Mr. Johannes !Gawaxab – SSC Board Chairperson

of the Commission and Executive Management have finalized the design, policy, budget, roadmap and stakeholders to be consulted on the plan and submitted these to the Line Minister. We are awaiting an opportunity to present this to our Portfolio Minister and other key stakeholders. We are ready to go but this requires political and stakeholders support and a significant law reform.

Q: In conclusion, what are the major challenges facing the SSC?

A: The first challenge is an outdated, non-supportive and unstable IT infrastructure. This poses major operational, financial and reputational risks for the institution. We recently had to close offices for a few days to stabilise the system. We have gone out on tender now and need to accelerate the acquisition and implementation of the system.

The second major risk facing the SSC is its investment portfolio. The short-term investment performance is dismal and we are facing concentration risks. The total funds under management of more than N$3billion, are all invested in Namibia and South Africa. Most similar funds have between 20%-30% of their monies invested internationally for diversification purposes. As a result, we are exposed and have submitted a proposal to the Portfolio Minister to mitigate this risk and we are consulting the Minister in this regard.

Finally, we are changing a culture embedded over so many years and we still have a few employees who we need to take along this journey. We are fortunate that the majority of our employees are dedicated to achieving our collective success and are aligned and committed to our mission. Most of our employees are very supportive, excited and enthusiastic about the new future.

These challenges are not insurmountable as evidenced by our recent successes: we have strengthened governance, put in place a strategy with a clear vision, strategic priorities and budget, revised property plans and so saved the institution more than N$650 million, improved benefits for our members, and plan to roll out the National Pension Fund. The SSC will continue its work under its mandate and continue to deliver improvements to the Namibian public.

ISSUED BY THE CORPORATE AFFAIRS DEPARTMENT OF THE SOCIAL SECURITY COMMISSION

4Tuesday 28 March 2017 Building Personal Wealth

1. Save enough for retirementDo you know what pension you are likely to receive in retirement? If not, regardless of how young you are, how young you feel, or how far off you think your retirement is, a must-do for 2017 is to find out what pension your retirement savings will be able to provide.The younger you are when you find out that you are not on track to a financially secure retirement, the better your chances of putting things right. A small increase in the amount you save over a long time, or switching to a

Seven money musts for 2017From retirement savings and insurance to using credit wisely and tax returns, here are some tips on making savings in 2017

low-cost retirement savings product could make a big difference to your pension. Typically, if you are saving for retirement through a company pension or provident fund or a retirement annuity, you will regularly receive a statement showing how much you have saved. But you need to know what pension that lump sum will provide.

2. Get the right medical coverIt is likely that you made your decision about which

medical scheme option to join at the end of last year, un-less you are changing schemes or joining one for the first time this year. Even if you belong to your scheme’s most comprehensive and expensive option, you will probably find that some medical expenses will not be covered.

If your scheme offers a medical savings account for day-to-day medical ex-penses, you may find that it is insufficient to provide for all your day-to-day needs. Even if you have an above-threshold benefit, which provides cover after you have exhausted your savings, you will face a self-payment gap before you again qualify for insured benefits.

3. Get your tax admin in order

If tax administration feels like a dark thunder cloud hanging over you, simplify your life by getting more organised.

4. Invest with a long-term view

If you don’t have a sound long-term invest-ment framework in place, the best-qualified person to turn to is a financial adviser.

5. Make sure your income is adequately protected

Your biggest asset is not your house or your retirement savings, but your future earnings. Your income over your working life supports you and your dependants, and you save part of it to provide an in-come in retirement. The loss of that income as a result of disability or ill-health will therefore have a major impact on you, and you need to protect yourself against this possible loss.

6. Check your household contents’ insurance

Household contents’ in-surance covers all your belongings in your home, and it’s a must for anyone who has accumulated items that have a substantial over-all value. Insurers advise that the only way you can realistically assess what you own is to compile a compre-hensive inventory of all the items in your home, big and small, not forgetting what’s in the garage and garden. This is no mean task, and many people regard it as too much trouble, or something they’ll “get to one day” (but never do). They get by rely-ing on a thumb-suck figure for the total value of their belongings.

7. Use credit wiselyAlthough the cost of

credit has come down, it’s still high, so it’s important to use credit judiciously.

What you pay for credit is determined in part by your credit score. However, with some credit agreements, you will always be charged the maximum prescribed interest rate.

– Adapted from Business Report

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