Building Financial Success and Happiness is relatively simple

2013-11-18 12:51

In 2004 I did a community study in the wide Pretoria area, what today is called Tshwane area. The study was funded by the Netherlands/Dutch Government through its Joint Financing Programme for Cooperation in Higher Education  (Medefinanciering Hoger Onderwijs or MHO-NUFFIC).

I looked at the problems of banks in getting more business from the public they serve. My particular interest and special focus was on the paradox of the great growth and the thriving of personal loan small businesses. Personal loan companies or loan sharks are making big business despite the huge amounts of interest rates they put on every money they loan out to the public. The study covered the communities of Mabopane, Soshanguve, Mamelodi and Atteridgeville.

My sub research question was how is this situation the way it is; this paradox, when considering that traditional banks such as NedBank, ABSA, Standard Bank, First National Bank, etc provide generally lower interest rates and are often more lenient in accepting people for personal loans. Why is it that people continue to borrow money from loan sharks where they are charged with all sorts of fees and high interest rate, that sometimes double or triple the loan given?

My keen concern was to discover the underlying motives.

The surprising and striking findings from the research were that the loan sharks; the credit companies’ big advantage over the traditional banks is their lower moral tone. When people go to the small business personal loan companies there is no guilt feelings when sitting with the loan boss in an interview, there is less moral virtue; it like two criminals consoling each other is so much as the loan boss is somehow perceived by society as immoral and bad and the people borrowing from them find solace and connection. They become kindred spirits in some way.

While in the traditional banks people have fears; fears of being rejected for the loan – the loan being disapproved and you going out of the bank in shame and sorrow. The feelings of rejection naturally cut deep in our souls in such situations. Another fear people have of going to traditional banks for loans is the bank discovering how the individual or the family is in a mess financially and then being given lecture or advice that shrunk the stature of the person or family down. The financial advice or lecture is perceived as a sign of disapproval and failure in life.  People are scared of being branded as financially ruined even though they know it, they don’t want to be reminded about it.

And further some of the questions posed on the bank loan application forms as I reviewed and scrutinized them were very probing; they go deep and bringing on the surface deep seated personal pollutions that are better off not revealed; mostly about financial history and budgeting.

So people were willing to pay the high price of fees and high interest rates from loan sharks just to avoid humiliations; not to be reminded by the traditional banks how messed up, out of shape and miserable they are financially.

It was because of the study that the American Academy of Financial Management, and thereafter its Global Board of Standards awarded me the professional fellowship. From that fellowship I further learnt a powerful key lesson when coming to personal finance. At the centre of successful personal finance that leads to financial freedom is what is called “horse sense.” Horse sense is about managing that wonderful little organization which is you. Horse sense merely refers to deferring the act of spending while greatly enlarging its power and possibilities. Horse sense is about playing your financial hand with all the skill you can command and acquire, making every move a silent tribute to your well thought personal judgment and daily common sense. Intelligent management of self and money builds strength of character, reliability and self worth.

Horse sense represents much more than mere money value. It is the proof that you are worth something inside of you. Any person can waste money, any person can indulge in the spirit of recklessness; grasping money on one hand and squandering it on the other hand. But it takes something more of a person to have horse sense by holding the money wisely, and the more you hold the money wisely the more of a better person you become. You have self worth that money cannot buy, you have genuine pleasures drawn from within that money cannot buy. This is the world of personal worthiness that leads to lasting virility and substantive happiness and joy of living.

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