admin“I’m 35, earning a decent salary, but I feel like my money just disappears every month. I want to start investing for the future—maybe a house and retirement—but I don’t know where to begin. Should I pay off my debt first, start an emergency fund, or invest right away? And in Zimbabwe’s economy, where is the safest and smartest place to put my savings?”
Expert Answer:
“Thank you for an excellent and very common question. You’ve identified the exact tension many professionals feel. The good news is you can—and should—tackle these goals in a strategic sequence. Here’s a step-by-step framework tailored to our economic context:
1. The Immediate Foundation: The Liquidity Buffer
Before any investing or aggressive debt repayment, build an emergency fund first. In our volatile climate, liquidity is your greatest shield. Aim for 3-6 months of essential living expenses (rent, food, utilities, transport). Hold this in a hard currency savings account or a very liquid, low-risk local currency money market fund. This cash prevents you from going into high-interest debt when unexpected costs arise.
2. Tame the Debt Dragon
Next, aggressively pay off high-interest debt (e.g., retail store accounts, credit card balances, unauthorized overdrafts). The interest on these debts often outpaces potential investment returns, making them your worst financial leak. For lower-interest, structured debt (like some mortgage or vehicle finance), you may maintain regular payments while beginning to invest.
3. Invest with Clarity of Purpose
Now, define your ‘why’ and timeline:
· Short-Term Goal (House purchase in 1-5 years): Capital preservation is key. Consider hard currency-denominated fixed-term savings plans, reputable property collective investment schemes, or Treasury Bills. Avoid volatile assets for this pool.
· Long-Term Goal (Retirement in 15+ years): You can afford calculated risk for growth. Here, a diversified approach is critical:
· Exchange-Traded Funds (ETFs) or blue-chip stocks on the ZSE/VFEX that pay dividends.
· USD-denominated money market funds or real estate investment trusts (REITs) for income.
· A portion in a tangible, income-generating asset—like a small residential property for rental—can hedge against inflation.
4. The Golden Rule: Automate & Diversify
Do not rely on a single asset class. Diversify across currencies (USD, ZWL), asset types (property, equities, cash), and geography (some offshore exposure if possible). The most crucial step? Automate your plan. Set up a standing order to transfer your investment amount immediately after your salary comes in. This ensures you ‘pay yourself first’ and removes temptation.
5. Final Recommendation for Your First Move Today:
Open two new accounts: 1) A USD emergency savings account and fund it until you hit your target. 2) A retail investor account with a licensed stockbroker or asset manager. Start by setting up a modest, monthly purchase of a stable, dividend-paying ETF or unit trust. This gets you into the habit of investing while you continue your research.
Remember: In our environment, safety is found in diversification, hard currency, and expert advice. Consult a licensed independent financial advisor who is fiduciary-bound to act in your best interest. Start small, but start now. Consistency over time will always beat waiting for the ‘perfect’ moment.”
This column is for informational purposes only. Please seek advice from a qualified financial advisor for your personal circumstances.