There are 6 common bad money habits which you need to be aware of and avoid if you desire to succeed financially.
Habit # 1: Impulse buying
When you work and have money in your pocket, there will be this urge in you to go out and spend the money. The urge to spend will usually be very strong that it will be hard for you to sit back. This is the experience of most working people. It is as if the money just wants to go out and bring things home to you.
Even if you do not intend to spend money, you will be tempted to do so when you enter shops. Your eyes will catch something which you did not think of and did not plan to spend money on. Even if you go window shopping, you are most likely going to end up actually shopping.
Habit # 2: Desire for instant gratification
Along with impulse buying comes the desire for instant gratification. This is the urge you feel to buy something now, without delay.
We see the desire for instant gratification in children all the time. When they have money in their hands, they want to spend it. When parents take them to the shops and they see things, they want the parents to buy the items for them that very moment. They do not care if the parents do not have the money to buy the items. They want the things now, and will do anything from crying and screaming to just sitting on the shop floors and refusing to move, until they have the items in their hands.
My advice for conquering the desire for instant gratification is this: if you see something and feel the urge to buy it right there and then, go away and think it through. Stay away for a few days and then go back. You will be surprised how much you do not like it as you did the first time you saw it.
Habit # 3: Unnecessary spending
Many families in Papua New Guinea suffer financially because they spend money on unnecessary items. At the top of my list of unnecessary items are alcohol, betel nuts and cigarettes. People do not realize that they spend a lot of money on these items for which they receive no benefit in terms of their health or their wealth. I call chewing, smoking, drinking and gambling as “addictions which add neither to your health nor your wealth”.
The amounts people spend on these items may seem very little – a little here, a little there - but when added up over a year, you will be surprised how much they have spent.
I know one family of 2 parents and 4 children who chew betel nuts every day. They chew on average 3 nuts per day. I worked out that they spend K1 each on 3 nuts, lime and mustard, or k3 per person per day. They could be spending K6,570 a year (K3 x 6 people x 365 days) without realizing it. The son dropped out of high school because the family could not pay his school fees. If they had just stopped chewing betel nuts, he could have continued his education without any problems.
In one of my financial freedom seminars a participant testified publicly that he spends at least K15 per day on betel nuts and cigarettes. To him, it was “only” K15. When we calculated what he was spending or rather wasting on an annual basis, he was shocked to find that the amount was something like K5,475. That’s a staggering amount, considering that he had been borrowing money every year to put his children in school.
Alcohol is a major problem in Papua New Guinea for people at all levels of society. Many people drink just to forget their problems. Others drink so that they can enjoy life with their friends. But the fact is, problems do not disappear when or after people get drunk, and there is no real enjoyment in alcohol. What is clear is that alcohol leads people into trouble, deeper debt, health and social problems.
Gambling is another major problem. The majority of working people participate in one way or another. The common forms of gambling are betting on horses and playing poker. Even politicians gamble, which is why parliament has to shut down when the Melbourne Cup race is on.
Make up your mind not to spend money on these unnecessary and unhealthy items. No one has ever become rich gambling or drinking.
Other unnecessary items commonly bought by young working people are things like fancy mobile phones, stereos, television sets, home entertainment systems, etc etc.
I have seen people buying these things on the first payday, and I have wondered whether they really needed them. I mean, when they did not have jobs, they could do without such items. But when they start working, suddenly these things become necessities.
I also see many parents buying toys, computer games and hand-held gadgets for their children. I often wonder what the kids learn when they play these games. To me these are unnecessary expenses. I stopped buying toys long ago, and computer games are taboo in our house. I’d rather the children read and do their homework than look at the TV screen and play games for hours.
Habit # 4: Buying to keep up with others
Most of us desire to be like other people around us. We are never satisfied with who we are and what we have. We are always looking at other people and wishing we were like them, have the things they have, and live the kind of lives they live.
Businesses understand this desire very well. That is why most companies spend large sums of money on advertising. If you look at these advertisements, you will usually see people enjoying a particular lifestyle, eating certain foods or wearing certain clothes and being in exotic places like luxury hotels and islands. The advertisements are designed to entice you to buy the items that are being advertised.
Their message is, “If you do not have these things, you are missing out on life.” It is called “consumer engineering”, and it forces people to spend their money just because someone suggested to them that they would live better.
You will definitely see your work mates and friends possessing certain things and seemingly enjoying life, and the temptation will arise to want to own the same things. When this happens, you must control yourself. You must again ask yourself whether the items you feel tempted to buy are needs or wants, assets or liabilities – for you. Do not look at how essential those things seem to other people. Ask yourself whether they are necessary for you.
If you do not exercise self-control, you will end up buying the items, not because you need them, but because your friends have them. Many people have bought such things with borrowed money. Not knowing how their friends acquired those things, they went ahead and borrowed just to have them, so that they could be like their friends. As Will Rogers observed, “A lot of people spend money they have not earned to buy things they don’t need to impress people they don’t like.” Don’t be one such person.
Do not try to emulate other people and their lifestyles. Or as some people say, “Do not try to keep up with the Joneses”. You are not competition with anyone as far as your lifestyle is concerned. Be yourself, and chart your own course in life.
Do not buy things just to look good in other peoples’ eyes. It is the desire to look good that ruins many people financially. Imagine if the whole world were blind. Do you think people would buy some of the things they buy? Would you buy them yourself? I guess not. And I propose that most peoples’ spending habits would experience a revolution.
The desire to be like others and look good in other peoples’ eyes, has sent millions of people all over the world into financial struggle and poverty, and continues to do so today. It will continue in future as long as people become dissatisfied with the way they are, want to become like others, and value the admiration of other people above their own financial destiny.
Habit # 5: Seasonal and emotional buying
There are certain times during the year when everyone seems to be buying things because it is the season. Newspapers, radio, television and supermarkets generate such hype that people become emotionally psyched up to just go out and buy things. Such seasons include Easter, Fathers’ Day, Mothers’ Day and Christmas.
Special times of observation and devotion such as Easter and Christmas have become highly commercialized. You hear Christmas carols being played on radio in all shops and see all kinds of toys, decorations and coloured lights being sold. These are all designed to entice you to part with your money. People care less that these are important days in the Christian calendar. All they are interested in is to use the occasion to squeeze more money out of unsuspecting consumers.
We Papua New Guineans look after and remember our parents every day. Sadly, today, an increasing number of people have allowed themselves to be programmed to remember their parents only once a year.
So much emotion and excitement is built up that most people feel they are missing out on something if they do not buy some of the items that go with the season. If you are wise, you will exercise self-control during these times and not buy just because everyone else seems to be doing it. You will realize later after the emotions have subsided, that you did not need the things after all. You will also realize that most of what is sold during these times is not durable. It is all artificial – including the flowers!
Habit # 6: Raising expenses to meet income
When you receive a pay rise or a sudden surge in income from commissions, bonuses, allowances and gifts, you will be tempted to go out and spend. The thought that this is extra money which you can afford to spend without feeling any financial pinch, is quite destructive.
Somebody observing this in most people has come up with a law that says, “Expenses rise to meet income.” In other words, the more money people have, the more they tend to spend. This tendency is as old as human history. Even King Solomon observed is his days: “When goods increase, they increase who eat them” (Ecclesiastes 5:11).
Despite the fact that people are coloured differently and live in different parts of the planet, they are essentially the same. When it comes to spending, almost the majority spend more when they have more. As incomes rise, so do expenses. It is as if money is only for spending.
If you want to follow the minority who succeed, you must not allow this to happen. Again, self-control is vital because the urge to spend can be overpowering.
I have seen people buying household items such as TVs, cars and stereos after a pay rise from a promotion or even an upward adjustment in income to compensate for increases in the consumer price index (CPI adjustments). Many of these people have actually buy the items on credit. They think that they are able to repay the loans with the new level of income. But they do not realize that their spending will lead to financial struggle in the future.
If you are aware of these main bad money habits and keep way from them, you will save yourself a lot of unnecessary headache and heartache.
* Tiri Kuimbakul is an economist, author and motivational speaker. He is creator of the ‘Seven Steps To Financial Freedom’ personal finance seminar which he runs for corporate organizations. He can be contacted on email@example.com.
“WITHOUT A STRONG WHY, THE EASIEST HOW WILL BE TOO HARD.”
Most students have one reason for doing well in school, which is to get a job after graduating with a diploma from a college or a degree from a university. Their parents tell them, “Study hard and score good marks so that you can graduate and get a high-paying job.”
However, this is but just one motivating reason. In this book I present eleven other reasons why I think students need to study hard while in school. These reasons are discussed in the twelve chapters of the book.
WHY THIS BOOK?
I have written this book because of the observation that people who succeed in life work hard because there is either one reason or several motivating reasons behind their actions. In other words, they have a burning reason or reasons for doing the things they do.
Where motive is not strong or compelling enough, people give up along the way. They may start well but run out of steam midway through the journey. They give up because the reason or reasons for taking action have not been forceful enough. Unless and until people become convinced about why they should act in a certain way, what they do will lack power and vitality.
As one of my mentors says, “Without a strong enough why, even the easiest how will be too hard.” What he means is that people who do not have a strong, burning reason for doing certain things will not take action even if it is the easiest thing to do.
A horse will drink water only if it is thirsty. If it is not thirsty, you can lead it to the water but it will not drink. You can force its head down so that its nose touches the water, but it will still not drink, because it is thirsty.
What this means for you as a student is this: You can learn as much as you can about how to score good marks, but if you do not have a good reason for scoring those marks, you simply will not study hard. Your parents can encourage, coax, bribe and even threaten you to get you to concentrate on your school work but if you do not understand why you should do so, you will refuse or pretend to work hard.
This is my first book of several books in the Academic Excellence Series. The second book will provide useful tips on how you can excel academically. But without understanding why it is important for you to study hard, you will just pass over the information in that book. So my intention is to provide you with the reasons why you should study hard and score good marks first, then I will discuss how you can do it.
Having a reason for doing something is like filling your tank with petrol before you go on a journey. An empty or half-full tank cannot take you far in your journey. Likewise, a weak reason for doing something will not take you far. You may start off well but lose all enthusiasm along the way, like it happens to most students who are excited about going to school at the beginning of the year but the interest wanes out as they go through the academic year.
I believe that students need a lot of motivation to stay focused throughout the whole course of their student lives during each individual academic year life. Being young and in many ways mentally and emotionally immature and weak, you are naturally vulnerable to a lot of attractions and distractions which can easily sway you from what you are really in school for, which is to succeed academically and graduate with an educational qualification that will empower you to live a good life. One of the ways to help you to stay on course is to present to you the benefits of working hard on the subjects you study.
I have met many students who think that they are doing their parents a favour by going to school and studying hard. But I want you to realize that you are doing yourself a huge favour. You go to school and study hard for your own good. It is for the kind of life you will live later that you go to school. Your parents pay school fees and meet other education-related expenses because it is their duty or responsibility to do so. They will not live long to see how you do in life. So it is really in your best interest that you go to school.
But for you to really comprehend that, you need to be presented with the benefits you will receive in life personally as a result of working hard in school. That is to say, you need convincing on the question, “What’s in it for me if I study hard and do well?” This book will hopefully answer that question.
The 12 reasons I present in this book are:
Reason # 1: You make your parents feel proud and honoured when you do well.
Reason # 2: You need to study hard to make it up the education system’s ladder.
Reason # 3: You can attract scholarships or sponsorships.
Reason # 4: Good marks will attract the attention and confidence of employers.
Reason # 5: You must do well seeing that the opportunity of being a student comes only once in life.
Reason # 6: By doing well, you demonstrate that you can survive in a competitive world.
Reason # 7: Studying hard is like sowing good seeds which will bear good fruits later in life.
Reason # 8: By studying hard in school, you can leave the world a better place than the one you were born into.
Reason # 9: Doing well in school can result in you setting a new course for future generations.
Reason # 10: Doing well and getting an educational qualification can open the world to you.
Reason # 11: Succeeding academically can bring you into contact with people you would otherwise never meet, who can help you get along in life.
Reason # 12: By working hard in school, you can lift yourself and your relatives out of poverty.
I believe these reasons to be very compelling, persuasive and motivating enough to convince you that studying hard in school has benefits for you individually as well as for your family and the nation at large.
I have six children, four of whom are currently in school. My wife and I always tell our children to do their best at school. But I have found that sometimes kids do not listen to their own parents. When somebody else talks to them, they tend to listen. I believe it is the same with you.
As a parent, I know that this book contains most of what your parents wish for you to hear and know. It exposes the heart of every parent in the country. I can visualize your parents giving this book to you at the beginning of every year and telling you, “Study hard this year. You have many good reasons to do so. You find those reasons in this book.”
I wish you success in your studies. I wrote this book because I know that you can do well. You have the ability to excel. You have the potential to do better than you have done up to this point in time. I believe in you; you must believe in yourself, and let this book inspire you to be determined to do your very best. You have twelve good reasons to do so.
In a world where jobs are fast disappearing, you need to think seriously about your survival. Can you afford to depend on jobs that have been created by other people? Are you safe depending on others for your livelihood? This book is based on the premise that you don't need a paid job to survive in the current turbulent times. You need to start your own business, and carve out your own destiny.
The book discusses 18 compelling reasons why you need to seriously consider starting your own business and becoming your own boss.
In Be Your Own Boss Volume I, I provided 18 reasons why you need to consider becoming self-employed and going into business for yourself. For the benefit of those who may not have read the book (and for those who have read it, it is always good to recap) the reasons were:
1. Jobs are scarce.
2. Jobs are not safe and secure.
3. Earn several income types.
4. Have multiple streams of income.
5. Have unlimited earning potential.
6. Achieve financial independence and freedom.
7 Gain control over time, one of your greatest resources.
8. Gain control over income, tax and life.
9. Leverage other peoples’ time and skills to get ahead.
10. Contribute to job creation.
11. Develop better money habits.
12. Make money work for you rather than you working for money.
13. Develop cost-consciousness and profit-mindedness.
14. Realise your potential.
15. Develop your “survivor’s instinct”.
16. Protect your assets.
17. Enjoy tax advantages available to the informal sector self-employed.
18. Enjoy tax advantages available to companies.
I have received many encouraging comments from people who read the book. I am also aware that several people have already resigned from work to start their own businesses. It was not my intention to have people resign from work, but I also know that you cannot read such a book and not get challenged. So I can understand why people have resigned from work to become self-employed. In fact, if I had read such a book when I held a job, I would have resigned too.
In case you have not read Volume I, I would encourage you to grab hold of a copy because it contains some very interesting information and life-changing ideas. You will also read my own personal story as an introduction to the book, which should motivate you and enable you to know that what I have presented in both books is based largely on personal experience.
Be Your Own Boss Volume II is a continuation of the discussion on the reasons for becoming self-employed. It starts with Reason Number 19, and provides 10 more reasons why you need to seriously consider becoming self-employed and minding your own business.
As I have reported, some people have testified that the book has challenged them to think seriously about starting their own small businesses, while several have already been inspired to launch out into the risky and deep waters of business.
One reader actually reported that he had made K60,000 in his first venture six weeks after reading Volume I. He had been employed for many years as an electrician but had never seen so much money in his life. After reading the book, he made his first attempt at being self-employed, and he landed a K60,000 contract.
He told me several months later that he was living in a new world. He likened his old life to those of the Europeans who believed that the world was flat, which caused them to fear venturing out too far in case they came to the end of the world and fell into an endless abyss. But when Christopher Columbus sailed to America and back, he proved that the world is round. This caused all other sailors to take long voyages and discover new worlds. Likewise, he was living in a new world which was closed to him because the only safe world he knew was one of working for others for his livelihood. Reading the book was like me having pushed him off his safety zone and into the deep sea, for which he was grateful, as now he is living a completely different life.
So from the feedback I have been receiving so far, I can confidently say that Volume I should have been sufficient to convince those that have read it about the possibilities and the potential benefits of being their own bosses. But in case it has not been convincing and persuasive enough, Volume II should ‘put the nail to the coffin’ as it were of any doubt or hesitation. It should push you over the edge of the cliff or the deep end of the sea.
Students from the University of Technology will be travelling to different parts of the country to educate the people to make good choices during the 2012 General Elections. What follows is an abbreviated version of a speech I gave at a corporate dinner they organized at the Holiday Inn hotel recently.
Millions of people in this country have been crying out in pain, hopelessness and despair. They have heard a lot about all the natural resources which the Government has been bringing overseas investors to develop. They have heard a lot about the economic growth the country has been experiencing. They have heard that there is a lot of money in the country. They have heard of the many supplementary budgets the Government has had to bring down because of excess revenue. They have also heard that the banks are flush with cash.
But hearing is all they have done. They have not seen any difference in their lives. So they have been praying and crying out to God in heaven, since their cries to fellow human beings in responsible positions have fallen on deaf ears.
If we look at Biblical history, one lesson we learn is that God always responded to His people every time they cried out to Him when they were oppressed by their enemies. And God’s answer was a simple one: He just gave the people a leader and worked through that person. When the people of Israel cried to God under slavery in Egypt, God gave them Moses. When they cried out to Him during the period of the judges, He gave them leaders like Othniel, Ehud, Deborah, Gideon, Jephtah and Samson. Later He gave the people the prophet Samuel, and Saul, David, Solomon and other kings.
The Bible says that God is the same yesterday, today and forever. What does that mean in the context of the prayers and cries that have been sent heavenward over the years by the common people of PNG? The answer is this: He will do what He did for the people of Israel. He will give the people leaders who will bring them out of slavery and poverty, and into prosperity and abundance.
But there is a major difference between the time of the Israelites and our time. Back then, God simply chose, anointed and presented leaders to the people. He didn’t ask anybody’s permission, not even the people He had chosen! (Remember Moses, and the excuses he gave to God, as to how unprepared and unqualified he was!). God didn’t call for a meeting with the elders or even conduct an election. He just chose one person.
In those days the nation of Israel operated under a theocratic system of government, which means that God was their ruler and He chose the human leaders.
The system we operate under is different and opposite. It is a democratic system, which means that men choose leaders among themselves through the voting process. God has therefore got to work within that system through the people to bring out the men and women He has appointed to lead at such a time as this. This means that the people play a big part in realising the answers to their prayers for leadership.
Our people need to be educated as to what constitutes good leadership, because today the majority of them equate good leadership to people who hand out the most cash and goodies such as rice and tinned fish, beer, lamb flaps, etc. Others define good leaders as people who shout the loudest (people who are very vocal but don’t necessarily talk sense) or those who help them make false claims against the Government, or even people who lead them in fighting with their enemies.
But these are not proper definitions of what constitutes good leadership. I would like to use this column to share with you my thoughts on what our people should be advised to look for in people aspiring to lead them.
The first thing they need to do is to pray and wait for God to show them the men and women He has appointed. I say pray and wait, because I have observed that many church leaders and their people do pray, but then they go around with lists of their members to various candidates seeking support for all kinds of needs and projects. In the process they end up voting the wrong people into power, and they suffer the consequences.
Apart from praying, here are three things to look for in candidates:
1. Character Character refers to the kind of person a candidate is. Some relevant questions to ask are: • Is the person someone that is honest? • Is he or she someone people can trust? • Does he or she fear God? • What is their marriage life like? Broken marriages, polygamous relationships or promiscuous lifestyles are a warning signs. (If people are unfaithful to their spouses, how can they be faithful to other people?) • How are the lives of the candidate’s children? (Leadership starts at home. If candidates’ homes are in shambles, how can they lead other people?) • Is the person generous and compassionate during normal times? • Does the person get drunk or gamble? (People who engage in such activities will do so on a magnified level when they get into power). • Is the candidate humble and teachable, or is he or she proud, arrogant and a know-it-all?
These are just some of the character indicators voters need to look for in people aspiring to be their leaders.
2. Qualification and experience This refers to what the candidate knows. This is an important quality because we live in a knowledge-based and knowledge-driven world. It is especially important that leaders are highly educated and are conversant with issues affecting the world and the country. We need leaders who can think critically and independently; leaders who can think for themselves and not rely on so-called consultants and mainly foreign advisors to do the thinking for them. We need people who can analyse information and debate issues intelligently before making decisions.
Importantly, our people need educated people who have a heart for them. I am making this point because many times educated people live in the towns and cities and go home only during the elections. They don’t really feel the pulse of the people because they don’t live among them. When they win, they forget the people.
Another important point I must point out is that educated people who aspire to lead the people must have proven track records of using their knowledge and contacts to bring services to the people. Many such people may be high-flyers at the national level, but they may not have the ability to bring services to the small people. They may point people to their knowledge and contacts and make promises, but if they haven’t done anything for the people using their knowledge and contacts as ordinary citizens, what guarantee is there that they will do so when they become Members of Parliament?
3. Vision Election time is a time when all kinds of promises are usually made to voters. Vision is what the candidate says he will do if voted into office.
If you care to listen to what candidates say, the first thing they will tell people is what others have done or not done. Candidates usually criticize their opponents more than focusing on what they intend to do. This is one sign that those people do not know what they want to do. They take their cue from the failures of their fellow candidates. They don’t have their own dreams and plans.
Our people need to be told to look for candidates who have a vision and a comprehensive plan as to how they will make the dream become a reality. And the people must see themselves in the visions and plans as well. The voters must see where they fit in.
Finally, when judging candidates, visions and plans must be related to educational qualification and experience. And the visions and plans and qualifications must be undergirded or supported by the character of the person.
PNG’s greatest need of the hour is leadership. Money is not a problem; leadership is the problem. Let me make it clear that I am not saying we need politicians. I am saying we need leaders, because not all politicians are leaders. We have many politicians, but not many leaders who are willing to become servants of the people. That is the problem. And that is why the 2012 National Elections are vital. The Election provides a once-in-five-years opportunity to have a say in who leads us. It is really a choice between progress and prosperity versus poverty and suffering.
The people of PNG are at a cross road. The country may have progressed, but the people have been stagnant as far as their quality of life is concerned. All in all, we can say that the country and the people have been going around in circles, in a similar manner to the wandering of the children of Israel in the wilderness. We have been wandering in the wilderness for 36 years now.
Our prayer and expectation is that the 2012 Elections will give us the Joshuas that will lead us into our Promised Land come 2016 and beyond, after the country reaches its 40th birthday on 16 September 2015. The fact that the export of LNG will start at the end of 2014 is no coincidence! The timetable is divinely set. God has a plan for this nation. He has a plan for each one of us, particularly the young people of this generation.
His plan is for prosperity and not disaster. His plan is for PNG to rise up and be counted among the great nations of the world, as we have been proclaiming every time we have sung our National Anthem in the last 36 years. That is the reason He has blessed the country with so many resources.
The prayers offered to God during the 1997 ‘Operation Brukim Skru’ prayer movement and others since then will be answered in 2012. God hears all prayers but answers in His own timing. I believe 2012 is when He will unleash the answers that have been piling up over the years.
But we the voters must be ready to become answers to our own prayers. We must pray and wait on God to reveal to us the men and women He has appointed as the Joshuas for PNG who will lead us to ‘the land flowing with milk and honey’.
If you are looking for someone who is part of a crowd, you cannot locate him or her easily by walking among the crowd. But you can easily spot him or her by isolating yourself from the crowd. In the same way, we will not spot God’s men and women by joining in the singing, the dancing, the long convoys, the giving of handouts and the euphoria that has come to be part of the election tradition in PNG. Our people need to stand apart and prayerfully judge aspiring leaders on the basis of their character, qualifications and visions before casting their votes.
Only then can we get God’s appointed people into Parliament in 2012. Only then will they make good decisions. And only then will our peoples’ years of wandering come to an end, and they will enter into their rightful inheritance.
Send your comments to firstname.lastname@example.org or text me on 7688 0033 or 7280 4588.
Empowering Ordinary Papua New Guineans To Create Wealth Through Business And Financial Management Training I was privileged to be invited to participate in the joint Certified Practising Accountants PNG and Australia Conference this week. The theme of the conference was “Wealth Creation, Management and Sustainability – The Accountant’s Role." What follows is an abbreviated version of my speech.
The topic I have chosen to speak on – Empowering Ordinary Papua New Guineans To Create Wealth Through Business And Financial Management Training - is very important because I am convinced that Papua New Guinea is at the social cross-road! The development journey we took as an independent country 36 years ago has not led anywhere for the majority of our people. Most of the ideals our founding fathers aspired to and wrote into the preamble of our Constitution have yet to become a reality. We basically started off well but lost track along the way.
Our development experience thus far can be summarized as follows: The country has been advancing economically, but the lives of the majority of the people have not improved. By majority, I am referring to 85% of the 7 million people that are not educated like all of us in this room are. We are indeed a privileged lot, and I have come here to remind us to spare a thought for our fellow Papua New Guineans who are struggling to make a living on a daily basis.
I will be making reference to various social indicators to lend support to my assertion that the lives of the majority of our people have stagnated in the face of economic growth. Let me refer you firstly to the United Nation’s Human Development Index (HDI), which is usually used to determine the level of progress made by the people in different countries of the world.
The UN uses four indicators to determine the level of human development in its HDI. They are:
1) Life expectancy at birth; 2) Mean years of schooling; 3) Expected years of schooling; and 4) Gross national income per capita.
These indicators are further divided into three dimensions of human development:
1. Health; 2. Education; and 3. Living standards.
This year PNG has been ranked as a country where human development is low on the UN HDI. The UN gives scores between 0 to 1 to determine where countries rank on its HDI. For 2011, this is what the UN has stated about PNG: “Papua New Guinea's HDI is 0.466, which gives the country a rank of 153 out of 187 countries with comparable data. The HDI of East Asia and the Pacific as a region increased from 0.428 in 1980 to 0.671 today, placing Papua New Guinea below the regional average.”
If we consider this ranking from the least developed to the most developed country, Papua New Guinea comes out number 35, which is near the bottom of the pile.
The Vision 2050 document states that Papua New Guinea aspires to be among the top 50 countries on the UN HDI in 2050. If we are currently ranked as 35th least developed after 36 years of nationhood, can we be counted among first 50 countries in 2050? We shall know in 40 years’ time.
In comparison, Samoa and Fiji, which are much smaller and less endowed countries, are categorized as medium development countries on the HDI. These countries are ranked 99 and 100 respectively.
Referring to Fiji, the UN report states as follows: “Fiji's HDI is 0.688, which gives the country a rank of 100 out of 187 countries with comparable data. The HDI of East Asia and the Pacific as a region increased from 0.428 in 1980 to 0.671 today, placing Fiji above the regional average.”
The Fijian people have done better than Papua New Guineans over the past 21 years, despite the political problems they have been through, and despite not being endowed like we are.
Let me present to you some more social indicators. All of us are no doubt familiar with them, but I would like to remind us in order to build up my case for the topic I have chosen to speak on at this conference.
• The proportion of people living under the international poverty line of US$1/day (US$365 = K870/year) has increased from 25% in 1996 to 40% today. This means that around 2.8 million people in PNG don’t see K900 in a year. PNG is a resource-rich country filled with cash-poor people.
• The number of school drop-outs is very high – over 80%.
• 90% of school-leavers cannot find jobs upon graduation.
• The army of educated but unemployed young people is filling the streets at a rate of approximately 40,000 per year.
• Only 500,000 people out of a workforce of 4.8 million in the country hold paid jobs. The unemployment / under-employment rate is 87%.
• Frustration and disillusionment among the youth is mounting…the “time-bomb” is ticking!
• While the elites find security behind barbed-wire fences (prisons), the under-privileged are taking control of the streets and the highways.
• After 36 years of independence, only 10% of businesses are nationally-owned while 90% is foreign-owned. The wealth of the nation is in the hands of foreign entities! The majority of Papua New Guineans are passive spectators on the “economic playing field”.
• Prostitution is on the rise. An increasing number of women are selling their bodies for a living.
• Prostitution and promiscuity stand as major impediments to the fight against the spread of HIV/AIDS.
• The rise in the number of so-called “single mothers” indicates that the family – the basic unit of society – is falling apart.
• The rise in the number of “street kids” shows that many parents are not able to look after their children. They are either poor or negligent.
• The increasing rate of drunkenness and drug addiction indicates peoples’ desire to escape the realities of life in 21st century Papua New Guinea.
I am involved with a growing number of former marijuana smokers in the Western Highlands Province. When I ask them why they decided to take the drug, the common reply I get is, “Laif em hard.” In other words, taking drugs helps them to forget their hardships. They find comfort in living in an imaginary world because the real world has nothing good to offer them. I guess the same goes for young people (both males and females) who are drinking ‘steam’ and other alcoholic beverages on a habitual basis.
Ladies and gentlemen, the acid test of development is peoples’ living standards. Development is not about constructing nice buildings like hotels, office complexes, cities, roads, etc. These are only means to an end. Development is really about raising peoples’ living standards. That is the bottom line. Sadly, the majority of Papua New Guineans are getting left behind.
Economic growth hasn’t trickled down to the micro or people level. The past 9 years of consistent growth have not been translated to raising the peoples’ quality of life. Growth has actually improved the lot of a very small minority while the vast majority has heard about it but not seen it impact their lives.
The picture on the human front is depressing.
Is all hope lost? Can something be done? Whose responsibility is it? Can I do something?
These are probably the kinds of questions going through your minds right now as concerned Papua New Guineans or friends of the people of Papua New Guinea as the case may be.
Let me suggest to you what you as an accountant can do to address some of the social problems the Papua New Guinean people are facing right now. This, I guess, is the gist of my message at this conference.
Let me start by making this statement: Financial problems lie at the root of social problems and law & order problems in PNG. I have been either directly involved in or interacted with several NGOs, churches and charity organizations who work with disadvantaged and under-privileged people in different parts of the country. What they have told me invariably is that most of the social problems they have encountered in their work are related to people’s need for money. People steal, kill, rape, hold up others, get involved in prostitution, etc because of lack of economic opportunities.
But I have established that what our people really need is not money (handouts), but empowerment through information and ideas with which they can sustain their lives. Yesterday somebody raised the issue of information-sharing in the workplace. I am saying that we also need to share our knowledge and ideas with the common people as well.
We all know the Chinese saying which goes: “Give a man fish and you feed him for a day; teach him how to catch fish and you feed him for life.”
My version of that philosophy for the purpose of this conference is this: If we the educated elites give ordinary people money, we feed them for a while; but if we give them information and ideas, we will empower them to feed themselves for life.
This includes both other people and our ‘wantoks’ – yes especially our ‘wantoks’! A lot of our people have land, their physical strength, skills, time etc with which they can make money. When we give money to them, we help them become lazy and dependent. They go away for a while but return again when they have financial problems. So we don’t really help them; we actually destroy them.
Coming back to the topic of empowering ordinary Papua New Guineans to create wealth, my proposal to all of us that are gathered here is this: The accounting fraternity needs to design and deliver simple training programs aimed at enabling ordinary people to make money as well as to manage and multiply it.
School drop-outs and other under-privileged people (youths) need training to start their own small businesses. And they need training to manage as well as grow their businesses.
As some of you may know, I have been publishing articles in the news papers. In the Sunday Chronicle I encourage readers to start their own businesses, while in the Post-Courier I discuss financial management and investing. I also go around conducting motivational seminars with students, unemployed youth, working class people etc. A lot of the work I have been doing has been free of charge too. Why have I been doing this when I could be busy minding my own family’s interests as most of you in this room have been doing?
Here is what I believe: As long as people don’t have enough money to look after themselves, they will cause problems for everyone else. They will stop scratching for a living, and start scratching and pinching us! I trust you know what I mean.
I would actually go as far as making this statement, which I hope you take home with you for this conference: As long as there is a wide gap between the “haves” and the “have-nots” in PNG, the “have-nots” will ensure that the “haves” do not enjoy what they have.
We may have our businesses, money, nice houses and cars, jobs etc, but we will not enjoy what we possess as long as the majority of the people are mere spectators. We will always live under a sense of fear and insecurity.
You only have to look at what has been happening in Lae recently to appreciate what I am saying. The situation there started with Morobeans aiming at driving off unemployed youth from the Highlands who were harassing other people on the bus stops and streets of Lae City, but ended up with business people from that region becoming the target of peoples’ anger and frustration.
My prediction is that it is not going to be long before riots and civil disturbances go from ethnic clashes to clashes based on social status, basically the “have-nots” fighting the “haves”. In other words, it is going to be the “have-nots” fighting the “haves” to have what the “haves” have.
The greater the gap between elites and ordinary people, life will become risky for the elites, such that many will migrate out in search of peace and prosperity.
It is in therefore in the personal interest of educated elites to empower the ordinary people to live sustainable lives. Empowering people is not just a role for the Government, NGOs, donor agencies etc. We the educated people need to do our part. In fact we are better-placed to teach, train and motivate our people to improve their own lives.
Ordinary Papua New Guineans must be transformed from being passive spectators and beneficiaries of handouts to becoming active players on the economic playing field. The people in this room have a very important role in this regard.
The Prime Minister stated in his address that accountants used to be number crunchers but are more becoming strategic business advisors. I am saying that accountants need to take their skills and knowledge to the ordinary people of this country, not just limit their activities to the walls of their corporate organizations.
Papua New Guineans need to shift from a poverty-alleviation (scarcity) mindset to a wealth-creation (abundance) mindset. Once again, the accounting fraternity can facilitate this transition.
Ladies and gentlemen! When I was asked by the organizers to participate in this conference as one of the speakers, I knew exactly what I wanted to accomplish. Instead of just providing some information to add to what you already know, I wanted action from members of CPA to rise up and contribute to addressing the social problems we face in our country.
I came to an assignment to this conference. My assignment was this: To motivate elites to leave your high offices and go down to the level of ordinary people and empower them to rise up from poverty, create wealth, and live sustainable lives.
I hope I have succeeded in getting some of you to think about and see things that are happening in the lives of our ordinary people a little differently. Instead of just blaming them or the Government for the problems, I have brought part of the responsibility for solving those problems straight to your door step. I hope that you will rise to the challenge.
I trust that some of you will start talking to your relatives and sharing ideas with them this coming holiday period instead of just handing them money.
I hope some of you will gather a group of unemployed people and talk to them about starting their own businesses.
I hope that some of you will use your holidays and free time to offer free financial advice to struggling local business people.
Thank you ladies and gentlemen for your attention!
I really hope that the accountants took something back from my presentation. I also hope that elites in other professions take this message to heart. Send your comments to email@example.com or text me on 7688 0033 or 7280 4588.
Last week’s article was on to buying shares on the Port Moresby Stock Exchange (PomSox). This article sets out the basic steps people who hold shares and want to offload or sell their shares have to go through. The steps are basically the opposite to those of buying shares.
Here the basic steps to selling shares:
Step # 1: Contact your broker by phone or email and advise them that you want to sell shares. Confirm with them the number of shares you currently hold in the particular company whose shares you want to sell.
Step # 2: Place a “sell” order with stock broker. The order is either “at market” or “at limit”. Once again, a “at market” order tells the broker that the transaction is to be completed at or near the prevailing market price. For example, if the closing price on the last trading day was K1.20, that is the price the broker will attempt to sell at. Failing that, a “at market” sell order gives him the freedom to sell at K1.15 toea if he cannot attract any buyers at K1.20/share. If you say that your sell order is “at limit”, you will also need to state the exact price or price the range within which the broker will sell your shares.
Once again, your instructions to the broker must be very clear, and verbal orders must also be confirmed in writing (fax or email). Good brokers should repeat the order back to you to verify what you have asked them to do.
Step # 4: The sell order is then placed on the market through the electronic trading system. The matches your “sell” order with “buy” orders. A trade occurs when “sell” and “buy” orders are matched by the electronic system. Please note that the matching process takes place immediately as information is entered into the system, but that does not necessarily mean that a transaction takes place. Sometimes (and this is especially so in an illiquid market such as PomSox) orders will takes days, weeks and months to be completed, simply because there aren’t any “buy” orders in the system that match your “sell” order.
Step # 5: Once a transaction is successfully executed, the broker should send you a note specifying relevant particulars of the transaction, especially the number of shares he has sold on your behalf. The note should also show the broker’s charges associated with the transaction.
Payment of the shares sold and the brokerage charges are required to be settled within 3 days of transaction being completed. The broker should credit your account with the proceeds of the sale, minus his charges. He will then send you a cheque or deposit the money into your bank account and advise you accordingly.
Step # 6: Once settlement is made, the broker arranges with the company’s share registry for the shares to be registered in the buyer’s name and your name to be struck off the list of shareholders.
The steps to buying and selling shares are straight forward, but the secret to making money on the share market is timing. In other words, when to buy or sell is very important. Your reason or motive for wanting to buy or sell shares is also important. If you just want to feel the pride of owing shares, I guess timing isn’t important. You can buy shares in any company at any time and at any price. But if your objective is to make money, your entry and exit times are vital.
I have referred to the PomSox as being an illiquid share market. This means that the number or participants is very small, such that you cannot buy or sell shares as easily as when there are many buyers and sellers. If you look at the list of shareholders of the companies that are listed on PomSox (you can obtain the information from individual companies’ annual reports which are published on the PomSox website), you will realize that the bulk of shares are owned by corporate entities such as the super funds rather than individuals.
There may be many reasons for this, but I suspect that one reason is lack of information and understanding on the part of Papua New Guineans of how the share market works. Because people don’t understand, they don’t participate. I hope that this column will shed some light.
Send your comments to firstname.lastname@example.org or text me on 7688 0033 or 7280 4588.
Many readers have been asking the question, “Should I invest in shares as a way of making money work for me?” My answer has been both “Yes” and “No”. Yes, it is a way of making money work for you; no, because most readers are probably not ready yet.
Before I explain why I think most readers of this column may not be ready to invest in shares, let me briefly explain what the share or stock market is. Shares are basically parts of a company which the owners of the company make available to members of the public as a way of raising funds to either start or expand the operations of the company. When you buy shares, you become a shareholder, or part-owner of the company. A stock market is where such shares are bought and sold.
You can buy shares when a company first sells them. This is called an Initial Public Offer (IPO). can also buy shares when those who bought during the IPO decide to sell their shares for whatever reason.
Another point that needs to be made is that you can buy and sell only through stock brokers. There are two such companies in PNG. They are BSP Capital Ltd and Kina Securities Ltd.
You can make money in two ways. Firstly, by buying and holding shares. When the company makes money (a profit) and the directors decide to pay the shareholders, you get your portion depending on the declared dividend rate and number of shares you hold in the company. Dividends are paid periodically (quarterly, half-yearly or yearly). When you buy and hold for dividends, you are an investor.
The second way is by buying and selling. You buy shares when prices are low, and sell when they are high. For instance, you may decide to buy a certain number of shares of a particular company when the price is K1.00 per share, and sell when the price rises to K2.00 per share. Your profit (also called a capital gain) is K1.00 per share minus transaction costs. When you buy and sell, you are a share trader. You may also be regarded as a speculator if you buy shares with the expectation and intention of selling them when prices will rise.
So, yes, you can make money by buying and holding shares or by buying and selling.
Now, why do I think most readers of this column are not ready? Two reasons are as follows:
1. The share market is risky. You can make money, but you can also lose money if the company does not make money or the share price falls. You don’t have any control over what happens to your shares, because share prices are driven by the market forces of supply and demand. A large portion of the risk is also associated with ignorance of the market and how it works. My assessment is that most people in PNG have little if any knowledge of the stock market.
2. To really make money, you must hold a significant number of shares. You can make small amounts by investing small amounts, but we are talking about making money work. The majority of readers of this column would not have the kind of money that is required to make real money.
My advice to readers is usually that they need to learn about the share market first. In other words, people need to invest in themselves first before they consider investing their money in the share market. They can get educated by reading books, attending seminars, and even asking people who know about the subject.
Secondly, I advice is to start a business first. A business presents you the opportunity to make the most money. A business is essentially a money printing system. The business may fail, but it can also succeed. When it fails, you lose their investment. This is always possible. But it is also possible that the business really takes off and makes a lot of money for you.
When the business makes money, my advice is for you to invest in rental properties. When you have a firm asset base of several properties which are generating income, you can start investing in the share market. Hopefully by now you would have educated yourself as well, so you can make real money investing or trading shares.
Send your comments to email@example.com or text me on 7688 0033 or 7280 4588.
In last week’s article I discussed whether you can invest in the share market now. My advice was basically that in order to really make money in the share market, you need to educate yourself first; and secondly, that you should start a business and invest in real estate as necessary steps towards investing in shares.
However, from the feedback I have received from readers, it seems like share market investing holds a lot of fascination for Papua New Guineans. As this column is about empowering readers with information to help them become financially literate and thereby make wise financial decisions, I have decided to provide the basic steps people go through in buying shares. This is for those who really want to buy shares. My advice on starting a business and buying rental property still stands.
Here they are the basic steps you will have to go through to buy shares in the Port Moresby Stock Exchange (PomSox):
Step # 1: Make contact with one of the stock brokers. Establish what type of services they provide, and the fees they charge per transaction.
Step # 2: Sign a client agreement and establish an account with the broker. The agreement states basically that you have authorized the broker to act on your behalf. The account opens the way for you to deposit funds which the broker will hold in trust for you and pay for the shares.
Step # 3: You place a “buy” order with stock broker. The order is either “at market” or “at limit”. A “at market” order tells the broker that the transaction is to be completed at or near the prevailing price of the particular share you are interested. A “at limit” order tells the broker that the transaction is to be completed at or within a specific price limit. Brokers usually charge different commissions for “at market” and “at limit” orders. Usually “market” orders are easier and cheaper to execute than “limit” orders.
There are also other (more exotic) types of orders. Examples include “stop orders” (which remain dormant until a certain price level is reached, when it becomes a market order.); “all or none” (the broker has to buy/sell the entire quantity of stock, or none at all; and “good till cancelled” (the order remains active until you decide to cancel it).
It is usually a requirement that the order is repeated so that there is no ambiguity as to what the broker is expected to do. Verbal orders must also be confirmed in writing (fax or email).
Step # 4: The order is placed on the market through a computerized (electronic) trading system. All participants in the market are connected to the exchange, so every time an order is placed; it appears on their computer screens. This makes the market transparent, and enables all the participants to see what is happening in the market. The system operates to match “buy” orders with “sell” orders. A trade occurs when “buy” and “sell” orders are matched by the electronic system.
Step # 5: Once a transaction is successfully executed, the broker sends the buyer a contract note specifying relevant particulars of the transaction, especially the number of shares bought and the price. The note also shows the broker’s charges.
Payment of the shares purchased and the brokerage charges are required to be settled within 3 days of transaction being completed. The broker draws on the buyer’s account to pay for the shares as well as receive his charges.
Step # 6: Once settlement is made, the broker arranges with the company’s share registry for the shares to be registered in buyer’s name. The registry is usually an independent organization which maintains the details of all the shareholders of companies whose shares are traded on the stock exchange. Previously share certificates were posted to owners. Today shares are usually kept on the registry.
The buyer is now a proud shareholder!
There may be some additional processes you are required to go through to buy shares, but the above 6 are the basic steps. You need to ask your chosen broker if there is anything else you need to do to buy shares.
The following are some of the privileges of being a shareholder:
1. You receive company updates including annual reports. 2. You attend annual general meetings and participate in decision-making. 3. You receive dividends if declared by directors. 4. You participate in dividend-reinvestment plans. 5. You receive other benefits such as discounts on company products or preference on new share issues.
Next week’s article will be on how to sell shares.
Send your comments to firstname.lastname@example.org or text me on 7688 0033 or 7280 4588.
Last week’s article (Savers Are Losers) generated the most number of queries and comments from readers so far on this column. For the sake of people who may not have read the article, the four main reasons people who save money end up losing instead of making money are:
1. Banks charge account keeping fees; 2. Interest rates on deposits are very low; 3. The government charges interest withholding tax at 15%; and 4. Inflation wipes out most if not all of what savers may earn from interest after taking account of the above three reasons.
One thing about the effect of inflation is that it cannot be seen. Savers can see from their monthly statements the fees that are charges by banks; they can easily see the interest rates that are offered by banks for various types of saving accounts; and they can easily see the amounts the government collects in taxes on interest earned. But they cannot see how inflation works to wipe out the ‘purchasing power’ of both their savings and the interest they earn on deposits.
Savers with the super funds, for instance, may get excited that their so-called retirement savings been growing in recent times. They may have received double-digit returns, but what they may not realize is that high inflation means reduced real returns.
Let me now look at upwards adjustments in salaries working people see in their salaries on account of increases in the Consumer Price Index or CPI.
I have met many people in my personal financial management and investing seminars who have admitted that they have raised expenses or borrowed money when they have received CPI adjustments in their salaries. They have been misled into thinking that their salaries have been increased (so they can now afford to spend more or borrow), whereas the truth is that they have merely been compensated for the reduction in their real incomes on account of rising costs of living.
Such CPI adjustments used to be by the full rate of inflation as announced by the National Statistical Office. In recent times adjustments have gone only part of the way, and that only after employees have raised the issue with their employers. Rising costs also affect employers so they are not so keen to talk about CPI adjustments. My prediction is that CPI will be a thing of the past in PNG as inflation goes into double-digits in the coming years. I also predict that there will be more calls for pay increases as workers find their salaries buying less and less. It will come to a point where workers have to decide between fighting for higher salaries and losing their jobs, or keeping their jobs and being content with stagnating nominal (cash) incomes and falling real incomes, and hence living standards.
The other thing about CPI adjustments is that it has the potential to push workers into higher income brackets, with the result that they end up paying more income tax. Effectively the government gets a raise in income tax every time workers get compensated for rising costs of living. The twin effects of inflation and income tax usually pushes workers back in terms of their standards of living.
So in answer to the question “Is a CPI adjustment really what it looks like?”, the answer is “No”. You simply cannot take things at face value. You have to look deeper at the inflation rate as well as the income tax implications before getting excited whenever the employer announces that you will receive a CPI adjustment in your salaries.
Mount Hagen, Western Highlands Province, Papua New Guinea
I aspire to motivate, inspire and empower students and young people in general to succeed academically, professionally, financially, personally, socially and spiritually through writing, speaking, seminars, workshops, coaching and mentoring. The motto of SECOS BOOKS, my publishing company is: "WE EMPOWER PEOPLE."