Thursday, 5 April 2018

Can We Really Live On Our Monthly Salaries?

In this economy where good jobs are scarce, you've finally got one (congratulations), but your monthly income tends to run out even before you receive the paycheck. Well, this is not a problem exclusive to the average Ghanaian. Six in ten Americans don't have $500 in savings, (though the average American will most likely have a better retirement because of e.g. reverse mortgage etc, a subject for another day) which means more than half of Americans cannot absorb a $500 emergency bill. In the UK, we're looking at four in ten (someone is low-key doing the Math and going like "but Tab, $500 is GHS 2,205 today and that's not some easy money" ... I agree). The point is, if those in countries where the average income is $857 a WEEK can't absorb up to 14.6% of their salaries for emergencies, then you know you're screwed if you live and work in a country where the minimum daily wage is less than $2.5 (two point five dollars, NOT twenty five).

The good news is, irrespective of your monthly income (and this is not coming from a person of privilege), there is always some steps you can take to gain absolute control over your finances. I wish I knew those steps, or I wish anyone knew those steps, but I know for certain, that the first step is to know where your money goes through tracking your expenses. If you don't have an idea of where your monthly income goes, you stand little to no chance of knowing how to gain this control you desperately need over your money. Your other option will be to increase your income streams; side hustles, freelancing online, teaching private classes, etc. but truth be told, it's far more complicated than how financial advisers make it seem. So let's talk about what we can control.

The most important reoccurring expenditures most of us have are food, rent, ECG/GWCL and transportation. Most of us don't buy clothes and shoes every month, so let's put that aside (RT if you buy clo ... you know what? nvm). To keep this post short, I'll single out rent and generalize the other expenditures. If you're someone who pays rent, have you ever considered the possibility that you might be spending more than you should on rent? I've had a good argument for renting in the past, and it's a good time to share with you just how best to know if you're making a mistake with your choice of apartment because of how much it costs.

When I had time to freelance on last year, I was scripting for a real estate YouTuber and one of the topics was "how much house can I afford?" Most financial experts (Time Money included) advised not more than 28% of income be pushed into mortgage repayment (and that's after making 20% deposit). If we are to transfer the same idea here, I'll say we have no business spending more than 20% of our income on rent. 28-30% on mortgage is fine, because you'll own the house when you're done with repayment, but you cannot spend more than GHS 200 on rent if you earn GHS 1,000 monthly, not under our current standard of living. Sacrificing more than 20% of your income on rent is not worth it and you'll feel the effect now and in the long run.

Finally, our attitude as Ghanaians towards mental health issues mean people with CBD (compulsive buying disorders) don't even know they have a problem. Those privileged enough to have the mental toughness and discipline to have control over their finances tend to shame those who don't. If you can admit right now that you can't save not because you earn too low, but because you spend on things that you shouldn't be spending on, then please seek help. If you don't have the means to afford professional help, start by making a monthly budget, a shopping list, and download an app that can help you track your expenses. Make the commitment to stick to these for a start and make progress from there, but ultimately, seek help. 7Cups might connect you to some professionals online to help you ... give that a shot if you still need to talk to someone.

Monday, 12 March 2018

Why Loans in Ghana Are Expensive & Inaccessible To All

Commercial banks basically have two types of assets: loans and securities. It is in the interest of banks to give out loans, but for high rate of nonperforming loans, among other reasons. That's not to say that the opposite is true; it's not like I'm assuming that banks in Ghana prefer to push their working capital into securities because those are more attractive (trust that I'll investigate and any interesting findings will be published). That also doesn't mean I'm low-key saying returns on securities in Ghana is unattractive ... aarrgghh ... see stress! Let's focus on the subject. So, banks gain revenue from the difference between the loan interests paid by lenders and what they pay to depositors as interests on deposits. With good loans, businesses are able to expand their production capacities and individuals are able to live a much better life, and on a macro level, that propels economic growth. So why are loans in Ghana expensive and inaccessible to all?

As we speak, the Monetary Policy Rate (the rate at which BoG regulates short and medium-term borrowing, also the rate at which banks trade with BoG and other banks) is 20%. That is so high, which means the BoG's target is to discourage borrowing in order to keep inflation under control; remember that when banks see growth in lending, that affects inflation positively. On this rate, the bank will add default insurance, projected protection against inflation and some other interesting ones specific to each bank. By the time they're done, you'll be lucky to get 25%. National Investment Bank (NIB) has a lending rate of 32% for construction companies and personal loans. SME's are riskier, so they get hammered with 36%. Stanbic Bank is quite flexible when it comes to loans. They do what they term as "performance based" lending, where they assess each individual and determine the rate the person deserves.

Anytime you speak to the top dogs in the banking industry, they'll tell you that their greatest fear when it comes to lending is the high rate of nonperforming loans, which seems to be growing annually. Take NIB for example; historical data has informed them that SME's are riskier, so they pay higher borrowing costs. You'd think that it'll be in the interest of Government and the BoG to make some special arrangements for businesses to borrow at a much cheaper rate, but that will also be obstinate over time, because most companies are technically decorated sole proprietorship and the BoG knows that. An arrangement like that can potentially trigger the collapse of the banking industry so ... ɔtwe bɛbrɛ, ɔbɔmofo nso bɛbrɛ (an Akuapim proverb which means "the antelope will toil, so will the hunter").

Another reason why loans are expensive in Ghana has to do with the value of the collateral securities that the banks request when they're giving out secured loans. This is the part I find very interesting. In some countries, their economy simultaneously grows and declines with their real estate industry; if the economy is good, people generally buy properties and when it declines, the value of properties also fall because people are unable to afford them. In Ghana, it always seems a declining economy precludes our real estate industry. Freehold properties are not expected to depreciate in value, no matter how deplorable the economy becomes. Even if people cannot afford freehold properties, their prices continue to appreciate. It makes selling these properties to recover loans a very challenging task for banks. On the other hand, the borrower who presents a good property to apply for a secured loan doesn't get any preferential interest rate.

The final reason I'll talk about is one that is rarely discussed; moral hazard and adverse selection. Credit/lending markets can't function properly if information about borrowers is inadequate; this information can be one that helps banks to assess borrowers’ intentions to deliberately default, or if it's profitable to lend to such people when they seek personal loans. Then for business loans, banks must be able to assess the nature of business people intend to use business loans for and if that business will generate enough to repay the loan. This is a problem commercial banks in Ghana face when analyzing the credit worthiness of an individual or business. Most of the time, they get discouraged because aside the information that the customer or business will provide, there's no other way to get access to crucial information that will make lending easy.

M'ano ɛsi!

Wednesday, 11 January 2017

My Kinda Love (By MissCeeci)

I have been unlucky in love.

No. It is not what you think.

I have never been broken hearted because of a man (well except that one time but not for the reasons you imagine).

I have been unfortunate in love because (apparently) I have a knack for making people (yes, both men and women) fall in love with me but I fear I may have never loved someone enough to let all of my hair down (figuratively of course).

Sometimes I feel like this thing called love is really not for me. But those times pass really quickly because I have too much love to give and I love the idea of being in love.

I know I have met my soulmate (if there is anything like that), but he is busy being with someone else and missing out on all this awesomeness (yes, I do say so myself). Maybe he knows we are soulmates, but he will most likely never know we are (or maybe we really aren’t and it is all in my imagination).

I really do want someone to share all my love and all my life with. I really want to share my kinda love with someone who wants to share his kinda love.

My kinda love is where we argue about the different waves of feminism and debate on what is being achieved by the feminist movement and why it is all not working, but we ultimately agree that everybody should be a feminist;

Thursday, 29 December 2016

A Rice Christmas!

Christmas is a period where lots of cooking go down, but cooking itself became a very important topic in my circles on social media when Muhammadu Buhari chose to tell the whole world that his wife belongs to the kitchen (like the blender and rice cooker, just to name a few items that actually belong to the kitchen). Well common sense will tell anyone who wants to eat to go to the kitchen to cook, buy food at a restaurant and/or (for those who can afford it) pay for the services of a cook. 

The love of my life likes rice so I decided to make her Christmas all about rice. Luckily for me, a friend added a bag of Cindy rice to the hamper he made for me. I nearly gave the rice out just because it wasn't a brand I'm used to but my rice aficionado Bae insisted I keep it (it was good new; I was on a budget. Once she said I should keep it means "problem solved". The money for rice will be used to purchase more mutton). Truth be told, I would have regretted giving out the bag of Cindy rice if I had to taste it somewhere else after. 

For breakfast I prepared her rice porridge (Bae doesn't like broken-rice porridge, and the full grain Cindy rice didn't disappoint), fried some eggs, toasted bread and served it in bed (you should have seen the grin; she had very little idea how her 25th was going to be lit). I asked her to stay in bed all she wants and rest (nah she didn't ... she had episodes of Orange is the New Black to watch) as I did the laundry and prepared mutton vegetable source. That afternoon my kitchen was lit; you can imagine how I wouldn't even hear my phone ring as the washing machine (could only find space at the kitchen) and blender were singing their own Feliz Navidad! Oh, she loved my mutton vegetable source when I served it with rice for lunch.

We prepared groundnut soup the previous weekend so I knew I had to take it out of the freezer around noon to stand any chance of a defrost so it could be used for an "Omo Tuo" supper. Ha! Cindy rice saved me from that "one-hand on a cooker" stress. It was smooth and soft. All I did was just to add some extra water and voila! I enjoy cooking, especially for her, but I learned how to cook from my father who also enjoyed cooking for his family. 

Men who cook don't have two heads and women don't belong to the kitchen.  

Monday, 8 February 2016

The New Income Tax Act (ACT 896) Reduces Your PAYE Burden


Amendments to The Income Tax Act, 2015 (ACT 896) was published by the Daily Graphic on Thursday February 4, 2016. This comes shortly after utility tariff hikes, fuel prices hikes and increases in other withholding taxes. Fortunately, the new PAYE (which is also a withholding tax), does not increase the tax burden of the Ghanaian income earner. For salaried workers, it actually increases their Take Home salary, other things being equal ... and of course, this has always been the case whenever there's an amendment to the Income Tax Act, just that most Ghanaians were not so certain if the rates on each threshold will be maintained in these "perilous times". The nontaxable chargeable income was increased from GHS 132 to GHS 216, and even though the subsequent thresholds on the table above sees increases, the rates are maintained.

Consider this example ... Koo Manu was employed by Abrabo Y3 Hard Company Limited on February 14, 2015. In his appointment letter, his gross monthly salary was stated as GHS 5,310.40 (subject to deductions for SSNIT contributions and income taxes). Under the old Income Tax Act, Koo Manu's take home salary was GHS 4,000, with a tax burden of GHS 1,018.33. This new income tax means that Koo Manu's income tax has reduced to GHS 948.96 ... his new Take Home salary should then read GHS 4,069.37 on his February 2016 payslip! What this means for Abrabo Y3 Hard is the obvious; SAME wage bill, but a reduction in the monthly statutory payments to the Ghana Revenue Authority (GRA) on behalf of Koo Manu IFO PAYE.

Demand a payslip from your company's accountant today! Make sure you're seeing some upward adjustment in your Take Home and if you have doubts, send me an email and I shall calculate your new PAYE and Take Home for you (for free). Times are hard Chaley, make every pesewa count!