QUOTE: ‘Generally, a culture in which there is a greater awareness of the basics of individual or domestic financial management — even the financial management of small businesses — can only work to the benefit of everyone’

WITH ALL the talk we have been hearing recently about the global financial crisis, and the measures being taken on the international as well as national level to make sure that billions of dollars are saved, or at least are not wasted, I have seen little about managing money on the individual or household level.

We live in a culture where the prevailing attitude is that — because we do not have a ‘sophisticated’ economy — there is less of a need to engage in budgeting and financial planning, outside of the mainstream business sector.

The need for greater personal awareness of how to manage money was brought home to me recently when an associate of mine retired; this person and family were forced to drastically change their lifestyle, something they had difficulty adapting to, because they had not planned adequately for the drastically reduced level of income in the post-
retirement period.

QUOTE: ‘In Guyana, men have traditionally dominated most spheres, and within relationships, are usually the ones in whom the authority is vested for the management of personal finances within the home. Indeed, at a time when domestic abuse has been very much in the news, it could be argued that this de facto denial of knowledge can be construed to be a non-violent form of abuse’

In times of less economic hardship, the ambivalent attitude towards money management that seems to pervade Guyana might not be a big deal; but in the current economic environment, financial management is almost inevitable, as is the case in other parts of the world.

In the United States of America, for example, financial management has reached such a level of sophistication that it has begun to even parody itself. An excellent example of this is the development of the term ‘recessionista’, by New York resident, Mary Hall, to describe someone who manages to look good in hard times. ‘Recessionista’ is a merger of the words ‘recession’ and ‘fashionista’; the first is self-explanatory, the second is itself a newly-coined term for someone who is always at the cutting edge of fashion.

While the ‘recessionista’ phenomenon might seem on the lighter side of all the economic gloom-and-doom that has been present across the world, for me, it illustrates two things, both in contrast to the situation that obtains here. The first is that someone is finding a creative way of adjusting to the financial crisis; the second that it is a woman who is doing so.

In Guyana, men have traditionally dominated most spheres, and within relationships, are usually the ones in whom the authority is vested for the management of personal finances within the home. Indeed, at a time when domestic abuse has been very much in the news, it could be argued that this de facto denial of knowledge can be construed to be a non-violent form of abuse.

I believe that if it is not the trend already, there is the potential within this situation for a great many women to be not only without a proper grasp of a relatively unsophisticated financial system as ours is, but also unaware of the transactions which affect them directly.

A sad example of this situation is when I had a firsthand observation of a case in which a widow was at risk of losing her property; the only indication she had that money was outstanding on it was on receipt of a letter which said the bank was about to levy on her home. Her husband had died without fully disclosing their financial situation to her. The tragic thing is that this was not an isolated case. I believe that this leaves women particularly vulnerable to the worst effects of the present unpleasant financial environment.

There is scope for an initiative where women’s groups can help empower the female folk by not only helping them manage in the event of a spouse’s death, which leaves them financially stranded, but also to teach them the basics of financial management while the significant other is still around.

Generally, a culture in which there is a greater awareness of the basics of individual or domestic financial management — even the financial management of small businesses — can only work to the benefit of everyone. Now, I’m aware that financial institutions offer ready advice to their clientele, but at the end of the day, that advice is only offered within the parameters of the services that any institution is offering.

A bank, for example, would offer financial advice, which will directly link to ensuring the facility is repaid within the required timeframe. For example, if a client applies for a car loan, the lending agency will advise that client on the best system of repayment he or she can opt for in taking out a loan for a new car; the institution may not advise the eligible customer not to buy the car, even though there is the likelihood that the car is not the best option for the client in relation to his/her other commitments.

At the basis of all this is the clear presentation of all options to the average citizen, and assisting them in decision-making. For example, helping the lower-income person to realise that the seemingly easy hire purchase terms in acquiring the new fridge will see him paying perhaps as much as 300 per cent of what he would have paid, if he had saved and bought the item at the retail price. Another example, and this is a looming problem for a higher income bracket, is the increasing prevalence of credit cards — persons in more prosperous economies have had to file for bankruptcy because of succumbing to the temptation of credit card use; the potential for digging a hole of credit card debt here has much greater implications, given the relative earning power here.

Perhaps the best approach, in my estimation, in changing the current situation is the creation of a programme of financial management advocacy. I know that there are already entities like the Chambers of Commerce, GMA, and GO-Invest, which provide advice to small business. Additionally, niche organisations such as the Rice Producers Association have played an integral role in helping small-scale farmers.

There is a gap, however, relative to advice offered to the average householder. This is where collaborations between entities like the Guyana Consumer Affairs Association and the media houses can be helpful. The range of advice can be varied, from assisting low- income families to balance their monthly budget, to counselling small-business owners on the best accounting practices.

One area of particular concern is the home construction industry. Guyana has experienced a housing boom in recent years, with many first-time home-owners expending a sizeable chunk of their hard-earned income in a sector in which many contractors have no scruples about exploiting their clients’ ignorance. An awareness programme — within the overall theme of providing financial management assistance — geared at educating people who have interest in constructing their homes about material costs, engagement of labour, etcetera could potentially save new home-owners millions of dollars.

Next week, I will look at the issue from a different perspective, one that involves the public understanding of the mechanisms under which public services are delivered to them. In my opinion the less information a person has about any activity they are involved in, which includes the engagement of a public service delivery entity (particularly where there is a user fee involved), the more vulnerable they are not so much to unscrupulous people, but to the sort of system that encourages dishonesty, lethargy and a lack of accountability. This is a theme I will be revisiting from various angles as this column comes to another New Year in publication.