Money, Wealth, and personal finance [Archives:2007/1089/Reportage]

September 27 2007

By: YemenTimes Staff
Although an extremely underdeveloped economy, Yemen is a country struggling towards making it in an increasingly globalized and competitive world. Yemeni traders dominated trade routes into the eastern parts of Africa all the way to the Philippines in south east Asia, and generations followed by migrating into neighboring Oil-rich countries in the 50s through the 80s. However, the post World War 2 world has seen fundamental changes and restrictions in the movement of people across countries, nowadays it is very hard to get a Visa in order to migrate to another country to work, while employment opportunities are increasingly less lucrative in Yemen given the economic circumstances. YemenTimes took the time to survey a wide number of people asking them a very tricky and peculiar question: How can one create wealth?

Sami Abdulallah, an entrepreneur, found a handy answer to this question, he said that business is the route to creating wealth, the more you do business and succeed, the more money you make and in turn you become increasingly wealthy, but he added, it isn't as simple as it seems, saying that you must have the business sense and the skills to compete, negotiate and deal within the local market; “money doesn't grow on trees, unless you plant the tree,” he says.

Along the same lines, Mazen Mahmoud, an employee in the privet sector, says that you have to invest in order to create wealth, you make an investment which you think is viable, you work hard to make it succeed, you spend a lot of time and effort in making it bear fruit, and eventually it will pay back.

However, a pessimistic view was also present, starting from the notion that you cannot create wealth in Yemen, says teacher Mohammed Ghalib, “no matter how much you work and how many jobs you might have, you always end up needing to spend the little extra money you have saved, I work two – sometimes three – jobs and I end up with barely enough money to sustain my family at the end of the month. How could you save any money to invest it or do anything with it if you barely make ends meet? And this is the situation for many people in this country he explained.

The books of Microeconomics and Personal finance state that in order to accumulate wealth one must do one of two things, either decrease his spending, or increase his earnings. Most opinions which talk about creating wealth start from the notion of increasing wealth, except for Saeed Al-Mou'men, who works within the banking industry. Saeed indicated that the total amount of money one spends during a year is very large compared to expectations, he proclaimed, “we spend a lot of our income here and there then we shout and say where is the money going, most people don't have a savings plan, know nothing about personal finance, and cannot organized their finances in a manner that allows them to save some money and improve their quality of life.”

Saeed added that if one keeps a simple ledger of one-month's spending, and at the end of the month analysis where he/she spends their money, many would be surprised, “I did this with a friend and found that he spends around 25 percent of his money on eating out and entertainment, now he is able to save 15 – 20 percent of his monthly income and he will be buying a car soon, something which he never thought he could afford to buy a few months back.”

The issue of personal finance has become more relevant not only to employees but also to employers as well, several of these have adopted schemes to encourage their employees to save in order to be able to afford more things and in turn have a better quality of life.

Rod T. Georges, Director of Human Resources in Occidental Petroleum in Yemen, has emphasized the importance of saving, stating that his company has introduced a savings plan where the company matches whatever contributions this employee puts into his savings account with the company, which means that the savings eventually double providing an incentive for the employees to save more eventually. Rod Stated: “this savings plan will make employees more secure in any unfortunate event, and will also provide the funds needed if this employee wants to get married, buy a car, or even buy a home.”

Making a Personal Investment Decision

The second question which followed in the survey asked how would the respondent invest any amount of money he/she has been saving, and what is the best way to invest in yourself?

Rouida Ahmed, a professional, stated that the best investment one can do is an investment to develop oneself, she explained that investing in education such as earning a higher degree, or developing one's skills such as learning a new language or computer skills, can help her get a better job which might double her earnings and career perspective.

Hani Hassan, a government cleric, stated that the best investment one can make in Yemen is in real estate, he justified this by saying that urban centers are expanding very rapidly, and with the growing population, investing in land or property is almost risk-free and a guaranteed investment that will have capital gain in its value or – if developed – can provide sustainable income through rents.

Nabil Yahya, unemployed, had a pessimistic approach, he said that if you had some money aside put it in the bank as a fixed of term deposit and receive interest on it, he says that interest of up to 16 percent per year is a risk-free and a good return on investment, he said that from his experience it is very hard to start a business, make it profitable enough to cover its expenses such as rents and salaries, and eventually maintain a net profit of 16 percent by the end of the year, it has become a challenge for many businesses to break even in Yemen, even banks, he says, they make most of their investments outside the country.

What the expert says

Renown personal finance expert, Peter Sander, has the following advice for anyone who wants to create wealth, he says:

1. Budgeting and Spending: he advices everyone to make and maintain a budget and adhere to it, ensure that the budget is reasonable and that you will be able to stick to it, while ensuring that your budget must have a surplus for savings.

2. Use reason, not emotion: Allowing emotions to cloud your mind will result in poor financial decision-making, and this sort of decisions will damage your budget and ruin your financial standing.

3. Develop a financial plan which includes medium and long-term financial objectives which you strive to achieve, the plan should be doable and must allow room for surprises and unfortunate incidents.