Many people who have fallen from grace to grass say friends and family rank high among the leading causes of financial frustration.

A decade ago, a female acquaintance of mine asked Mr Frank Nsimbizizze, then a middle-aged wealthy employee of a parastatal in Kampala, if she could borrow Shs120 million. The friend, I shall call Nattabula for a history of causing troubles for colleagues, claimed she was going to use the money to buy a house in Ntinda, a city suburb, telling Nsimbizizze she would pay him back “as soon as I get it.”

In Nsimbizizze’s mind “as soon as I get it” meant no more than six months and because Nattabula was a ‘trusted’ friend, he did not hesitate to help.

How fortunes changed

When Nsimbizizze was first taken on by a big consumer company in 2005 as their procurement director, he said his life changed because all of a sudden, he had “investment options.” Suddenly he would be making Shs288 million a year, out of his monthly salary of Shs24 million - a lot of money 10 years ago.

Nsimbizizze was aware of the fact that many money-making chances are short-lived. He, therefore, quickly started planning how he could save, protect and invest his money. He identified what he called a buttressed five-year investment strategy.

“I will take this money and create something with it. I will put it to work for me by venturing into real estate business, and in five years I will be somewhere,” Nsimbizizze thought; and indeed he swung into action.

However, in no time, our long-lost friend Nattabula had appeared in the picture. Because the ‘rich’ man was an undisciplined saver, he went against his investment strategy, and let our friend borrow the money.

“A long lost friend I hadn’t heard from in many years called me, and the first thing she did was to congratulate me on my job. But before I asked where she had been all those years, she had told me she had a problem which could only be solved by me. And I had to help…I gave her the money in two days,” said Nsimbizizze.

The social binding

In many African societies, probably in others too, many people who seem to have hit the financial mark end up experiencing financial stress within a year of retirement or losing their jobs because they did not get the opportunity to save.

But what explains this? They spend the greatest percentage of their incomes fending for the vast majority of relatives and friends who do not have the chance to get incomes. Financial experts say friends and family are one of the leading causes of such financial situations because those that have had the means/incomes have been conditioned from a very young age that when they ‘financially make it’ they are expected to take care of the people around them.

So Nsimbizizze did not do otherwise but took on the responsibility of taking care of his peers and family, from providing their daily bread to giving them handouts and ‘loans’ as he did with Nattabula. Nattabula failed to pay, disappearing into the city as fast as she had appeared.

And as Nsimbizizze was still nursing the loss, his services were terminated during the company’s downsizing exercise. He started to wish he had stayed focused on his investment strategy, or probably that he had not lent out money like that, or that he had built a house, but all these were now wishes. He is now reduced to a near pauper, and survives on handouts from family and friends.

One-man bank

The problem with personal money, especially when you are poor at respecting own financial decisions, is that you are the unchallengeable finance manager and managing director of your one-man ‘bank’.

Psychologist Elvinna Kabahinda, a Kampala practitioner, observes: “In such situations, you are not only the CEO of the unregulated bank called ‘You’, but you also work as its loans officer and collections officer at the same time.”

But how many of us are good at collecting money from those we have loaned? “Many of us are not so good at the job of collections officer,” Ms Kabahinda says, adding: “We are simply human.”

“Whenever we help people in need, we feel soothed the same way an addict feels when they feed an addiction,” she says. “True, human beings are chemically created to be drawn to situations where they can save someone. It is very hard to stop,” she adds.

Mr Ibrahima Diop, a personal finance coach based in Ottawa, says although we have value beyond our money, it is important to remind ourselves that we still need the finances.

“Remain a true relative or friend by helping assistance seekers make a financial plan. Just be with them during a challenging time but do not sacrifice your own financial freedom.” Additionally, he says, make the person in financial need aware of how a loan would affect your personal economy and relationship with them.

“Let them know that you are being stressed to lend money. Instead ask them to help you stay focused on your own goals. If you decide that it is within your budget to provide financial assistance, make it business. Draft a contract that sets clear repayment terms,” Mr Diop says.

Nsimbizizze says he wishes he would have thought of that. “I would have sat Nattabula down and proposed to her a formal way to go; probably I would have said: Let’s put the friendship aside and talk about the details of the loan you want from me and the pay-back plan. I would also have saved more money from my monthly salary.”

Although Nsimbizizze is yet to resurrect financially, his financial frustration taught him a bitter lesson and he now makes sure to take care of his own needs and goals first before extending a helping hand.

Making smart sense of your finances

If you want to grow wealth, do not hang with people who just sit around and complain about things like government. Instead read, learn, and be with uplifting voices.

Use your free time. Do freelance stuff like writing on Saturday morning or drive around to check up on opportunities, for instance new houses. If you buy a Range Rover for attention, you may be doing it at the wrong time in your life. Also you will have to keep upgrading that car to keep impressing the same people.

The skills you have are assets; improve them, instead of buying the latest phone (the world will never run out of things to spend money on). Realise that half your income in a year goes to taxes and rent. Also we earn money five days a week but spend seven days a week.