Think about consequences of your financial decisions

A while back, I held a lengthy discussion with one of my workers who has served me well, and is by all measures a good and loyal worker. I was upset with her for failing for the umpteenth time to meet my expectations around making a comprehensive shopping list.
Over the years, I have cultivated a discipline of shopping once a week. I have observed that the more trips one makes to the supermarket (or the fruits and vegetable market) the more likely they are to make unbudgeted purchases.
This loyal worker of mine repeatedly forgets to include in the shopping list, essential items such as salt, soap, detergent and cooking oil. What drives me round the bend is that she uses these items almost daily and so she should be in a position to anticipate when stocks are low and so include the item on the shopping list before supplies run out.
Additionally, her forgetfulness is rarely around the same item, so if she forgets to include detergent this week, the following week it will be sugar, the week after it will be cooking oil and the list goes on. My frustration was that I failed to come up with an efficient “model” to predict what would be missing from the list when it was presented to me every Saturday morning. The only way to deal with this annoyance was to carry out an audit of all the provisions we needed and construct the list myself. So the lengthy discussion (read lecture) I had with this worker was around how much she should be paying me for doing her work and what she was going to do differently to ensure this small problem goes away. Later as I introspected on this discussion, I realised that this problem had existed since I hired this worker. This lady has been consistent in her forgetfulness for the entire four-year period that we have been together.

Given her other very strong point, this weakness is not a “deal breaker” for our employer- employee relationship. Once I got to this point of acceptance, I formulated a plan that addresses this small problem. I discovered that being an introvert, this lady dislikes going to the market or supermarket which is a considerable distance away from where we live. So when she forgets an essential item I ask her to make a trip to the supermarket to buy the item. You will not believe how much progress we have made now that I have introduced a consequence. The incidence of forgotten items has dropped to once a month at the very most. I am still trying to work out what she is doing differently. Has she devised a plan to ensure she does not forget or is she just more attentive when making the list?

Be serious
This situation got me thinking about my finances and how I address any weaknesses with regard to financial discipline. Interestingly, acquiring discipline in any area of our lives is related to the seriousness or magnitude of the consequences of our actions.
We see this very clearly in school where our choices and actions have predictable outcomes. If you did not finish your assignment on time you could predict what sort of conversation you will have with your class teacher.
If you were caught drinking or smoking you knew that a suspension or expulsion from school was a likely outcome. In school, the time interval between actions and consequences is shorter and so corrective action is implemented quicker because someone else is thinking for you.
As we grow older, this interval between our actions and their consequences lengthens as we become more independent.

Results of indiscipline
In the area of finances particularly for the middle class, the consequences of indiscipline usually take a relatively long time to manifest. This situation is made worse by urbanisation and the culture of taking loans to finance our urban lifestyles. We have moneylenders, banks and other financial institutions willing to give us loans to fuel our consumption culture.
This is especially true for people who receive a regular pay cheque. It is quite easy to develop poor financial habits like leaving beyond your means knowing that in a month’s time you will get your salary. People that are self-employed tend to be more disciplined in their handling of money and tend to exercise more caution when making decisions. This is because broadly speaking, the consequences of getting it wrong will manifest themselves much faster for someone self-employed than for someone who has a regular pay cheque.

Grace Makoko is Standard Chartered’s head of financial markets, East Africa.

E-mail: GraceTibihikirra.Makoko@

SOURCE: Daily Monitor

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