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Start Your Balance Sheet Today

Stop seeing it as a one man/woman job but start seeing it as a collective effort.

Tshepo Moloi

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When should you start thinking about investing YOUR money?

There is widespread sentiment in the “world of money” regarding the lack of savings culture amongst millennials. Phrases like “The YOLO generation” (YOLO being an acronym for the phrase, you only live once) and “Generation Rent” are being used to describe millennials relationship with THEIR money, emphasising a lack of prudence shown by millennials in the handling of THEIR monies.

Delving a little deeper into this issue, one needs to consider the economic factors facing millennials and what investment vehicles are not only available to millennials, but are also easily accessible.

The 2017 Old Mutual savings and investments report states that approximately 1 in 2 18 – 34 year olds live at home with their parents. Bond originator, BetterBond says it assisted almost 34,000 buyers to acquire new homes over the past 12 months, at an average price of R1.1 million. It said that the average age of these buyers was 37, and at an interest rate of 10.25%, the average monthly repayment on their loans is R8,631.

Coupled with the fact that you will likely not get 100% bond approval therefore some percentage of deposit down payment would be required, this illustrates how inaccessible purchasing your own home is to first time young professionals.  It is no wonder words such as “Black Tax” or “Sandwich Generation” tend to be prominent in our society.

Related: Stokvels 101: Is Group Saving For You?

So what can you do with the little bit of disposable income you do have (if fortunate enough) to start an investment portfolio?

When asked where young working professionals would save a salary increase in the savings and investment monitor survey, next to saving it in a bank account (fixed deposit/money market), stokvels came up as the second most preferred method of saving disposable income.

Interestingly enough, increasing contributions to existing retirement funds or even starting up a new retirement fund scored lowest, even though 46% of youth (18 – 30) living in metros have some form of retirement fund in place (largely due to auto enrolment retirement schemes offered by many employers in the formal workplace).

One could argue that this shows lack of understanding and importance that millennials have for the retirement investment industry as they are more likely to save for short-term goals (5 – 10 years) than goals that are decades away.

So given this knowledge, what can the average South African do to build their balance sheet within the confinement of a savings behaviour which they understand and trust completely?

building-a-balance-sheet

Perhaps the first step to understand and good news is that you do not have to start from scratch as a young millennial. With an existing cushion of R44billion circulating in the stokvel industry, one should look into their own family and immediate network to see if there are any stokvels they can join (see Stokvels 101: Is Group Saving For You for advise on performing an audit on a stovel before joining). Stokvels that have a bit of young blood injected in them tend to take on a little more risk and enjoy high value returns on investments made due to high monthly contributions and the capital already held.

Trust me, you would be surprised how many friends and family are keen for you to join their stokvel.

Buying actual property might be a challenge as a start for a new stokvel but nothing stops you from owning shares in a listed property shares. Barriers to entry here are low to non-existent plus as a group you don’t have to worry about municipality rates and taxes (if own property) or tenants headaches.

Related: Stokvels Enter the Digital Age

Just do your homework on the desired property shares and if needs be, nothing is wrong paying a little school fees to a wealth financial advisor. Given you are paying as a group rather as an individual, you will likely pay a fraction of a cost (the power of group buying).

If your balance sheet is already weighed more by debt than assets then you might want to consider a using your rotational pay-out stokvel to reduce if not clear your debt. This form of stokvel arguably is the oldest stokvel type but yet the most powerful.

A counter argument to such a stokvel would be why not put that money on your own for same period and reduce your debt once the saved amount reaches a required lumpsum. My response, peer pressure and accountability to others that stokvels bring can never be replaced. And perhaps this is the secret of building a positive balance sheet for yourself even with little disposable income. Stop seeing it as a one man/woman job but start seeing it as a collective effort.

Tshepo Moloi (M.Eng) (M.Fin) is a Soweto born citizen who holds a strong sense of community and believes in empowering everyday South Africans to become equitable, financially active citizens. As a member of several stokvels himself, it became apparent to Tshepo that the biggest challenges limiting stokvels from reaching their full potential were administration constraints and the lack of financial management tools available to stokvels. This gave rise to StokFella, a financial services provider for stokvels looking to grow their wealth.

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Cash Flow

The Simple Way To Pay Wages When Your Staff Don’t Have Bank Accounts

If you have employed casual workers over the busy season, you can pay wages even if they do not have bank accounts.

Absa

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At Absa Business Banking, the things that are important to you are just as important to us. We understand your business needs, which is why we have developed tailored solutions to help you where it counts. Take CashSend Plus, for example. It is a payment solution that enables you to pay workers even if they do not have bank accounts.

Related: Hiring Your First Employee? 5 Things You Need To Know

It is safe and secure

Your employee will receive a six-digit access code and a ten-digit reference number, so that they can verify the transaction. The money is instantly available at an Absa ATM.

You can even pay yourself

We have all lost bank cards or wallets at some point in our lives. What an inconvenience. Well, it is good to know then that you can access cash by sending it to yourself. Now, that is what we call better. 

Related: How Salary Transparency Empowers Employees – And When Not To Use It

Interested?

Please speak to one of our consultants or call 0860 111 123 or visit your nearest branch.

Absa Business Banking 

Do better business. Prosper.

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Entrepreneurial Balancing Acts with Debt

Young South African entrepreneurs face many challenges when it comes to debt-related financing. Small and medium enterprise (SME) owners typically require extensive debt financing from bank and non-bank lenders.

Harald Merckel

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Young South African entrepreneurs face many challenges when it comes to debt-related financing. Small and medium enterprise (SME) owners typically require extensive debt financing from bank and non-bank lenders. Unfortunately, many South African entrepreneurs are limited in their ability to access capital markets. Among others, the major challenges facing entrepreneurs include lack of credit history, no collateral, shaky credentials, and unformulated business plans.

Regardless, SA entrepreneurs are forging ahead and using multiple resources at their disposal such as payday loan providers, non-bank lenders, family and friends, crowdfunding and other economic empowerment initiatives to raise the necessary seed capital for investment purposes. Given the staggering unemployment rate in the country (+25%), the only way out for many people appears to be entrepreneurship. The 2008 global financial crisis threw the economy for a loop, and now the hopes and dreams of many South Africans hang in the balance.

Related: Every Tough Choice Has Management Debt – Are You Accounting For Yours?

ISM Study Sheds Light on SA Entrepreneurial Pros and Cons

An intensive study conducted by the University of Cape Town’s Unilever Institute of Strategic Marketing (ISM) found that the country is experiencing ‘a crisis of aspiration’. Simply put, many South Africans are struggling to attain their career objectives in an economy that has been ravaged by corruption, mismanagement, and scandal. Despite tough economic times, South African entrepreneurs are determined to try their luck. Pressing challenges in the form of rising unemployment, and an economy mired in failure are challenging entrepreneurs to be more inventive than ever before. The most volatile component of the economic spectrum in South Africa is the middle class.

Many South African families have lived the high life, or ascended the rungs and then been knocked down a peg. This instability is creating added volatility in a country where high crime, mismanagement and political rancour pepper the scene. For many entrepreneurs, any access to credit is a godsend. Banks and non-bank providers offering personal loans, business loans, or credit card funds invariably expose themselves to debt default. For entrepreneurs, it’s important to know where to draw the line. Access to lines of credit in a crippled economy is significantly more valuable than the equivalent access in a developed economy.

How to Know when you are Overstretched as an Entrepreneur

Debt is considered a prerequisite for investment purposes. Most South Africans simply don’t have the necessary capital to start up a high-tech venture, fund a new business, or conduct marketing and advertising activity. As such, lines of credit are increasingly being used to propel business activity among SMEs – both in the formal and the informal sector. However, once debt reaches untenable levels, the tough questions need to be asked. For example, if multiple loans and multiple payments are required monthly, revenue streams need to be evaluated against expenses to gauge whether this is a feasible status quo.

Related: How To Handle Your Post-Holiday Debt

Many entrepreneurs find it difficult to manage multiple loans simultaneously, although it is necessary to acquire the capital from multiple sources. One of the ways to deal with these types of exigencies is a single loan from a low-cost lender in the form of debt consolidation loans. Simply put, these loans are provided by bank or non-bank lenders at lower interest rates than the prevailing interest rate on other lines of credit. By taking out a debt consolidation loan, the entrepreneur has more disposable income over time by not paying the higher interest on credit card debt.

Escape Debt Before Debt Consumes You

There are several other ways to know when your personal financial situation has reached critical mass. For starters, the nature of your business may require you to continue dipping into lines of credit to maintain business operations. If you don’t have the requisite discipline to stop indebting yourself, you may not be able to get out of debt. Debt consolidation is only effective insofar as you have the necessary discipline to put an end to debt financing of all business-related activity.

Credit should be used sparingly, and profits should be generated to allow your business to prosper. In a tight economic climate, costs are the bugbear that need to be attacked. Lavish trappings are unnecessary for business functionality – modest budgets, and high-quality goods and services are far more effective than window dressing at a premium.

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How South Africa’s Small Businesses Plan To Invest Their Money In 2018

Here are their five areas they should focus their attention on in the next year and beyond.

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Despite economic uncertainty, South Africa’s small businesses are positive about the future. In fact, our State of South African Small Business report reveals that 40% of small businesses are expecting to grow. However, to achieve growth without overextending their limited resources, small businesses need to invest wisely.

Here are their five areas they should focus their attention on in the next year and beyond.

Marketing

When times are tight, companies typically reduce their marketing spend. This isn’t the case for 36% of South Africa’s small businesses. These respondents recognise marketing as a critical investment area.

They’d rather make a concerted effort to grow their customer base, than sit still and do nothing as consumer demand declines.

Related: What To Consider When Investing Your (Hard-Earned) Money

Technology

Without access to the latest technology, business growth can quickly stagnate. This is why 23% of South Africa’s small businesses plan to invest in up to date equipment, whether that be new machinery, mobile devices or computers.

The right investment in this area can give a business a real competitive advantage.

It can help boost profits and improve operational efficiency – both of which can help a small business withstand difficult economic conditions with greater success.

Product development

Consumers are spoiled for choice. Their needs are constantly changing and companies can’t afford to become complacent. To keep up with market demands, 22% of small businesses plan to invest in product development. Barring a few timeless classics, most products need a regular review and tweak to stay relevant and popular.

Technology

technology-south-africa

Digitisation is transforming business functions across the board. Technologies, like cloud software can take care of laborious administrative work.

Related: How To Make Money Investing, According To Ashton Kutcher

This liberates employees from time-consuming tasks, enabling them to focus on more strategic work like customer retention and acquisition.

Technology has the power to improve productivity and efficiency. Which is why 18% of small businesses are going to focus their investment plans on this area of their businesses.

Customer service

The customer should always be the priority. It doesn’t matter how good a product is, if there are no customers, then there’s no business. As competition increases, the user experience becomes more and more important to win over customers.

Business growth depends on happy customers and to achieve that, 18% of small businesses plan to invest in delivering better service.

All five of the above business areas are worthy investment focuses. The question is, how does a small business work out what to invest where? The only way it can invest effectively is with a full view of its company finances. A small business needs to be able to see which functions have provided the best return on investment to date.

Related: 12 Millionaire Habits To Start Making Serious Money Soon And Build Wealth In A Hurry

It also needs to consider how much investment capital it has to spend. What’s more, before it makes an investment in say, marketing or product development, it must know exactly how and where the money needs to go.

The right software can help a small business access the real-time insights it needs to make better, faster financial decisions. To combat increased competition and market uncertainty, South Africa’s small business owners need access to up-to-the minute information from any device no matter where they are. An informed investment has the greatest chance of success.

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