The not so simple path to financial independence
Not Simple and Not Easy
It’s ridiculously simple to become financially independent (FI) in the UK.
Simple, but not easy.
The journey to FI means embracing significant self-discipline for years whilst ignoring the Joneses.
Definitely not easy.
But what if you lived in a region where the journey to FI was neither simple nor easy? Like sub-Saharan Africa.
Hang on, how on earth would a potato-loving Irishman know what it’s like to pursue financial independence so far from home?
Well, having married a Zimbabwean, lived in Zambia for five years, and bored African friends from many countries with money conversations, I have some experience.
The issues are not universal across countries, or even within countries, but there appear to be some consistent challenges.
By necessity I’ve made some generalisations.
My intention is not to downplay the nuance, simply to avoid this post turning into a dissertation.
Why Should You Care About Financial Independence On Another Continent?
Friends in the UK often tell me that Financial Independence is not possible to pursue because their income is too low / they are too old / they’ve got kids / buying new cars is a ‘need’ not a ‘want’.
If I can demonstrate that it’s possible to overcome significantly greater barriers to Financial Independence, then that should give you the kick up the backside encouragement to make some changes.
That’s the first reason.
The second reason you should care is because different cultures look at problems in different ways.
And perhaps one of the success stories below may give you an alternative perspective that will allow you to solve your challenges.
A final reason is that realising how fortunate we are may make us more grateful for what we have and more empathetic to others.
And grateful empathetic people are more likeable.
At this point, you are either distracted by the photo of the beautiful Ken and Mary on the righthand side (there’s a reason my picture doesn’t appear on our blog), or you are still reading…
In which case, thank you, and let’s start looking at some of the challenges.
Big Picture Challenges To Financial Independence
Let’s start with some macroeconomics. The statistics below are for Zambia, but the surrounding countries are similarly stark.
- Education – less than 30% of secondary aged kids attend school
- Unemployment – runs at c.30% (including ‘discouraged job seekers’). The highest unemployment in the UK in the last 150 years was 22% – in the years before World War II
- Low salaries – a significant proportion of those with a job earn barely enough to survive and the minimum wage is £0.45 / hour
- Healthcare – ranked in the bottom 5% of countries by the World Health Organisation, with average life expectancy of about 60 – which is 20 years less than the UK
I think it’s fair to say that if you live in the UK, you have a distinct advantage.
Its Impossible To Spend Less Than You Earn
The basics of Financial Independence are to spend less than you earn (a lot less if possible) and invest the difference.
Simple, right? But what if it is impossible to spend less than you earn even if you have a well-paying job…
There is no effective social security system in Zambia.
No unemployment benefit, no disability benefit, no government support.
This is where ‘family’ comes in.
Your family is effectively your social security system and you ‘borrow’ from them to meet your needs.
When I say borrow, it’s more of a ‘pay it forward’ gift.
If at some point in the future you can support someone else in your ‘family’, you do so.
The purpose of the system is to ensure the basic survival of everyone in the family.
“Cross the river in a crowd and the crocodile won’t eat you” – African proverb
And ‘family’ does not just mean your parents and siblings, but includes cousins, second cousins, third cousins, neighbours, people from the village you grew up with and friends.
It’s a big group (and I thought my wife’s family was BIG – but it has nothing on a Zambian ‘family’!).
When you have a job, it means that there are a lot of family members to support.
One of the things I most love about Zambia is the focus on family and friends.
I haven’t always prioritised properly between work and family but living in Zambia has been a wake-up call.
The importance of family and community is definitely something we can learn from.
“Call it a clan, call it a network, call it a tribe, call it a family: Whatever you call it, whoever you are, you need one” – Jane Howard
Independence vs Community
In the UK we live independently and being self-sufficient is highly regarded.
In Zambia the focus seems to be on living in supportive community and putting the collective good ahead of the individual.
The challenge for someone accustomed to independent living is that the family support system seems to hinder people from elevating their personal circumstances as their ‘wins’ are spread amongst so many.
When I first talked to Zambian friends about the family commitment, I referred to it as an obligation.
They quickly corrected me, saying there was an expectation to help, but not an obligation.
They did however note they didn’t feel they could turn down a request to help.
The family commitment also means that even if I only have enough to food to feed my wife and kids for the next few days, I’m obliged to share with wider family who have no food for today.
The needs of my wider family for today supercede the needs for my nuclear family tomorrow. That makes me a little uncomfortable, but I get it.
Now I’m Uncomfortable
What really stretches my comfort levels is when a family member’s poor financial decisions still result in a commitment to help from his wider family.
If for example an uncle spends every penny on a lavish wedding celebration but doesn’t hold anything back for the electricity bill due the next day, then the family will help him out.
That feels like facilitating poor decision making.
Why not help those truly in need but reject ‘undeserving’ requests? Not so simple.
To turn down a family request when you have the resources is dishonourable.
It is the person making the request who seems to determine whether the need is genuine.
For the giver to decide otherwise would be an insult.
It would also lead to exclusion from the family and waving goodbye to the safety net.
I have not met anyone willing to forego this ‘insurance’.
And at a much baser level, whenever I’ve asked friends if they would consider rejecting one of these ‘undeserving’ requests, there is incredulity that I would suggest this.
Not so much a fear of losing the safety net, but more the importance of upholding family honour.
Proud and Frustrated
Stephen*, told me how happy he was to be able to go back to his home village after his first paycheck from his first graduate job.
But the trip left him penniless.
He had uncles who needed money for school fees, a cousin that needed medication, and many family members that needed food and supplies.
He was full of mixed emotions.
Proud that he’d been able to contribute financially to his family for the first time and of the respect he earned doing so, but frustrated that he had to borrow money on his return to work in order to make it through to his next paycheck.
It also seems like the system drives consumerism.
I’ve witnessed a close friend spending every penny to buy an expensive phone when they knew that their employment would finish in 6 months.
Their rationale for the purchase being that if they didn’t spend the money, it would end up disappearing into family support.
There Is A Path
I have however met several people who have found a way to both meet family obligations, whilst also setting aside some finances for the future of their own nuclear family.
Stanley*, a medical professional, wanted to build a house.
But knew he could never save enough because of family commitments.
So instead he bought bricks.
Bricks that would not disappear to family commitments. And within a few years, he had enough bricks to build his home.
Gershom is a friend who has a full-time job as well as a vehicle rental business.
I ran a personal finance course with Gershom and as expected we were told by many attendees that saving was impossible because of family commitments.
Gershom ran the participants through his solution:
- Pay yourself first – take money out of your current account and put it into a separate account. Better still, put it into a fixed term saving account. That way you can genuinely say you do not have access to any funds
- Avoid lifestyle inflation – if you continually upgrade cars / phones, then your family will assume you are wealthy, and you will be the first person they approach with a need
- Budget for giving generously to family – if you actively plan for supporting family, and do so with a generous spirit, then it will not be unexpected and not feel burdensome
- Ensure your family knows who you are supporting – this reduces the number of requests. It also allows you to politely turn down new requests by explaining that you have already supported the family
My favourite advice is how Gershom deals with requests he believes may be wasted.
His solution is to find another way to help.
He told me that someone in his family approached him for a business start-up loan.
Gershom knew that the person had a history of failed start-ups.
So instead Gershom carved out some tasks in his truck hire business and created a job for the family member.
It met the family member’s need for a job and an income, and Gershom benefited from a reduced workload.
Investing in Zambia
Even if a person can somehow manage to save despite family commitments, there are yet more hurdles to overcome.
In the UK there are 3 main investing paths to Financial Independence.
1. Broad based index funds
There is a stock exchange in Zambia. But I wouldn’t recommend investing in it. Unless bitcoin is insufficiently volatile for you.
Investing in a global fund is possible but far from straightforward.
All the Zambia based brokers I came across were selling eye-wateringly expensive products domiciled in tax havens with unclear structures and tax consequences.
And most of them are called Dick Turpin. I may have made that last bit up.
It would be technically possible for a Zambian to use a European based broker.
But that would be like asking a UK resident to find a broker in Asia and invest in Asian stock markets.
2. Real Estate
Real estate requires significant savings for deposits, transaction costs, refurbishment, and contingency funds.
Assuming you can save the money without falling out with your family, there is one more significant hurdle.
There aren’t any mortgages in Zambia. Well, there are, if an interest rate of 20% doesn’t put you off, and you can get approval.
Your chances of approval are roughly the same as beating Usain Bolt in a sprint. Whilst wearing your best Morris dancing gear.
So the only viable approach to real estate investment is Stanley’s – a few bricks at a time.
3. Starting A Business
There are huge opportunities for new business ventures.
But there are additional potholes beyond those we encounter in the UK.
Like no electricity for 10 hours a day, or internet so slow / unreliable you send carrier pigeons rather than emails.
Ezekiel* is a carpenter who builds amazing furniture but has ‘some’ trouble setting realistic completion dates.
He once made a coffee table for us that was only four months late.
One of his projects involved making a sofa for a new client, for which he received a 50% deposit.
When the client arrived to pick up the sofa, she changed her mind about the colour and demanded her deposit back.
Ezekiel tried to negotiate an alternative settlement, but he was visited by the police.
It turns out that the client was a close friend of the local police chief.
Ezekiel was threatened with prison and had to borrow money from family to repay the deposit.
Trust me, you do not want to do jail time in Zambia. Particularly if you’re still wearing your Morris dancing gear.
It’s Not All Doom and Gloom
The friends I have who are succeeding on the investment front have focused on buying cash generating assets.
Over the course of the last few years Gershom has built a fleet of seven vehicles which he hires to construction companies.
It has grown steadily and organically.
One of the advantages of having his own business is that he can provide more support to his wider family than he used to be able to.
But he is also providing a path to financial independence for his own nuclear family.
Musonda*, a gardener for an expat couple, started a chicken hatchery which now employs several family members.
He started out with a handful of chicks and has now grown this venture to hundreds of chickens.
I think my favorite story is from a friend who identified an opportunity to buy sardines from Lake Kariba to sell in the capital Lusaka.
When he arrived at Lake Kariba, he found a lot of buyers and not enough fish for everyone.
It took my friend two days to buy enough fish to fill his vehicle.
Whilst waiting he talked to the fishermen about how they would spend their money.
Most listed commodities like radios and solar chargers for phones that were unavailable at Lake Kariba, but plentiful in Lusaka.
When my friend next returned to Lake Kariba, he came with everything the fishermen wanted.
The fishermen willingly traded their fish for goods.
My friend filled his vehicle in less than an hour, and the goods he bought to exchange for the fish cost him about 60% of the cash price of the fish.
To Wrap Up
Zambia is an amazing country.
We loved living there and are incredibly thankful for our friendships and experiences.
However, it’s a country where Financial Independence is certainly not simple or easy.
Not only is there pressure to climb socially, but there is also the expectation to meet extended family obligations – not just with discretionary funds, but with funds earmarked for your own family’s needs.
And when you remove what are the two most common investing levers to Financial Independence in the UK (broad based index funds and real estate), you are left with a very, very narrow path.
I’m in awe of those like Gershom who are treading this narrow path. Their stories remind me of just how privileged I am.
Unfortunately, there are many other issues that I haven’t touched on – like gender inequality.
- The One Way To Fast Track Your Financial Independence
- 9 Qualities You Need To Reach Financial Independence
- How To Become Financially Independent In Your 30s
Many thanks to Mr & Mrs Humble Penny for to allowing me to guest post on their site.
I first came across them about a year ago and really connected to their mission to make personal finance education accessible for all. To be writing on his site a few months later is humbling (pun intended).
My wife and I blog at Cutting Through Chaos, which is our take on life and how to navigate a path through the craziness of four young kids while living abroad. Our tribe consists of an opinionated 8 year old, an off-the-wall 5 year old and a pair of risk-seeking 3 year olds. We would love to connect with you through the website, at twitter on @cuttingchaos, or on email at email@example.com. Thank you for reading!
* names changed to provide anonymity
Do please share this post if you found it useful, and remember, in all things be thankful and Seek Joy.
Thanks again Ken for the honour of posting on the Humble Penny!
And I’d love to hear from any HP readers who have questions or comments!
The Humble Penny says
Paul, you are most welcome! 🙂
One of the many things that I love about your post is that you have made this topic very real and approachable by most people, focusing on a part of the world that is often viewed very negatively. I love that it wasn’t just focused on FI related calculations, but really focused on the practical challenges, issues about family, community, and even manages to cover some of the levers for FI.
I also particularly find it interesting that your exposure to various parts of the world has enriched your personal life experience, and given you the opportunity to connect many dots as you change your environment.
This is definitely up there for my favourite guest post of the year. Thanks again, Man!
Any time Ken!
Ben Levy says
Hey Paul, Wow! This post is a strong wake up call for me. Are people in that part of the world generally more hard-working than we are here in the UK? does the fact that community is prioritised, make people happier? How easy or hard is it for one to start a business out there?
Ben – some really great questions!
Its difficult to comment on how hard working people are – just like in the UK, you get people who work really hard and you get others who dont work quite so hard.
My general sense is that people are happier. When you draw your happiness from family and connections rather than material things, and then you focus on family and relationships, I think you’re likely to be happier. But this probably assumes that basic needs in Maslow’s hierarchy are being met.
There are a lot of informal businesses operating in Zambia – generally sole traders – and at least initially, I suspect few bother with all the red tape and paperwork needed to ‘officially’ start. The challenges are that start up capital is very difficult to gather, the rules are very ambiguous, and there are more ‘unexpected’ issues that you’d encounter in the UK (like the threat of jail if you dont hand back a customers deposit having delivered exactly what they’d asked for).
But Zambia is an amazing country, with an amazing people. And I’d highly recommend a visit should you ever get the chance.
And feel free to keep the questions coming. I could talk all day about this stuff!!!
Mark Crawford says
Very inspirational post and shows how much opportunity we are lucky to have in the UK. I particularly like the story of the sardines at Lake Kariba and how the opportunity was recognised and developed.
Thank you Mark. We really are fortunate. But despite the hurdles, there are people who still manage to find a way to make it work in the developing world.
Hi Paul. You’ve written an eye opening post. It really just makes me realise just how fortunate we are in the UK. when you have so much going for you, it’s easy to complain over the insignificant things.
As I read your post, it occurred to me – does the fact that people struggle so much to save, mean that people don’t bother thinking about retirement?
What took you to that part of the world anyway? And what were your first culture shocks?
What nationality do your children take? I presume some were born there? Sorry about the question overload haha 🙂
Hi Lara, even living there I’d have to remind myself every now and then to relax about the really insignificant problems I’d waste too much mental energy on.
I love these questions. There is no real saving for retirement – and family is expected to provide for you. Most of my friends and colleagues were the ones who were providing for their parents – who in many cases, lived with them.
Interestingly, there is a little bit of a change coming in urban areas, where the next generation is more exposed to Western culture, and family bonds are starting to weaken. So not sure what will happen to those living in urban areas in my generation when they are retired, and their kids don’t feel the same obligation to them.
I work in finance and having worked for large accounting firms and corporates in the UK / US wanted to ‘contribute’ something back to society. I spent a lot of my youth in South America and my wife is Zimbabwean, so there was a draw back to the developing world. I got a job in Zambia as the CFO of a healthcare NGO. Really rewarding and purposeful work.
I’m sure there were many culture shocks I don’t even realise. And then there are the more obvious ones. Like frustration at having to visit a bank 8 times to get a bank account open because they kept forgetting to give me forms that were required, even though on every single visit I’d clarify that I had all the forms that were required and there was nothing I was missing. But these ones are minor frustrations and help teach you patience – which is probably the most important asset you can have.
I think the bigger shock is around the health care systems. We had access to the best private hospitals, but they are still poor. My daughter and then I spent several nights in hospital about a month after we arrived in country with some sort of gastrointestinal bug. Seeing the comparatively (to the NHS) poor facilities and having to be hospitalised for something that felt relatively minor was a wake up call.
Our kids are a strange mix and we were having this conversation with them last week. So they are a little bit Irish, a little bit Scottish, a little bit Zimbabwean and a little bit Zambian!
Our twins were born during our time in Zambia, but not in Zambia. Most people with the means either go to the excellent private health care available in South Africa, or return to their home country. Twins are high risk and not something we would have trusted in Zambia.
Keep the questions coming!
Thank you for your nteresting story and views about Zambia. I am Zambian and agree that the ‘pressure’ to help others can be overwhelming at times. I used to be in that boat until I told family members that I could no longer help. I had been helping them for at least 20 years – far too long! I told one couple to come up with business plans and I would give them capital – a lot of money to them but practically nothing to me, about USD 250 each. The wife started selling at the local market and was able to support her family, but the husband did nothing. A few years later, the wife said I did well to cut them off because she now had a thriving business. I was amazed. Another family member stopped talking to me because I had cut her off. This showed me that she liked my money more than she liked me. I once gave money for school fees to this person, but apparently she wanted the money for cement to extend her house so she lied to me. I now only help when I want to, except for my parents who I give a monthly stipend. It’s a difficult fine line between doing right and wrong money wise as far as money is concerned with your family.
Kathy, really interesting to hear your perspective as a Zambian! Helping family financially is a tough balancing act in any culture!!!
I can relate to every bit of your story and I strongly believe the dependency factor is at the core of what is keeping us from financial independence in Africa. There is a need to teach our continent(Africa) how to be financially responsible.
Your post is enlightening