Budgeting 101: IT IS SCARY, BUT IT MUST BE DONE!!!!

Budgeting 101: IT IS SCARY, BUT IT MUST BE DONE!!!!

I love that a lot of my friends are brilliant and well-educated women. Girls Rock!

Image result for smart girls rock

When I first started thinking about personal finance, I asked my girlfriends if they had a budget. The popular answer was “kind of.”  Some said they felt that a budget was useless because in most cases we hardly stick to it because life happens. Indeed, life happens.

It also occurred to me that while every personal finance blogger tells people to have a budget very few actually do something like budgeting 101 or budgeting for dummies to give the average person like me a real sense of how budgeting works or should be done. In this post, I attempt to do just that.

What is a monthly household budget?

I was raised by a trader. My mom crossed the border between Zimbabwe and South Africa, Botswana, Zambia and occasionally Mozambique selling different crafts from Zimbabwe. In fact, I was once nearly stolen on the train when she took me to South Africa as a baby. I bring this up because most people in my life have been employed informally. Back when the Zimbabwean economy worked traders could plan their lives send kids (me) to good schools, live middle-class lives and pay their bills. All over the world, the middle class is feeling a little bit of a pinch. The cost of essential commodities is rising faster than people’s salaries, and this makes it a little bit harder to plan for the immediate future, and the long term is often left out of the equation.

Your monthly budget is a plan or a road map for your finances.


Be honest with yourself in terms of your income. How much money do you earn per month? If you have a regular job how much are you taking home after the government takes its share and all your other deductions? If you are self-employed, you may want to calculate an average from the last 6 months. Or as my mother would do – make a budget based on your two lowest earnings over the previous 6 months. Unless you have a fancy high paying job in the tech industry your monthly paycheck will likely stay the same for at least a year – the economy – right!

Step 2. (WISH LIST)

What are the things that you need to live from month to month? Primary needs vary from person to person, but generally, these include (not necessarily in this order):

Household Expenses
Car loan
Car insurance
House insurance
Life insurance
Parental Care
Remittances if different from PC
Charitable giving and tithing
Pet supplies
Tuition (it helps to divide the annual cost by 12)
Travel (this is a HUGE cost in our house)


The best way to figure out how much you spend is to go over your past bills. Try to be as honest with yourself as you can.

I always try to start off the year with a budget breakdown. I am changing jobs, so this is a perfect time to redo the budget and think over my finances. This is a rough draft and a lot more complicated because we do not know for sure yet what our final income will look like and the actual expenses, but this should give you a general idea of how we are thinking about things. I also call this my dump it in all list. We start out by listing all the major expenses (after tax) then we will adjust as we go forward. We are trying to budget about 80% of our combined income – we assume that the real costs will be higher so we will adjust the income portion accordingly. The income from my businesses is pretty set, so there is no wiggle room there.



Plug in the numbers – before you worry about what financial experts say about proportionality just go ahead and do the math to see where you are. Especially on your basic needs. Doing this will help you readjust as needed for long term planning. Your budget can be very fancy, but I like to keep mine simple. This is an easy to use template from mint.com

Monthly Budget Template
Monthly income for the month of: _January 2020___________
Item Amount proportion
Salary 1000
Spouse’s salary 1000
Other 0
Total 2000
Monthly expenses for the month of: ___________
Item Amount
Mortgage/Rent 400 20%
Car loan
Car insurance
House insurance
Life insurance
Food 200 10%
Pet supplies
Other 0
Total 600
Income vs. Expenses
Item Amount
Monthly income 2000
Monthly expenses 600
Difference 1400



The first time you do this, you may find out that your actual budget is more than 120% of your income. I have done this too- but I find that the visualization really helps.

Ideally, you want to balance out your budget so that you are spending between 30 &35% of your gross income (pretax) on housing, 15-20% on transportation, 20-20% on food and less than 15% of your income should be going to debt. It is also recommended that you save at least 5% of your income but if you can save 20% including retirement and health care contributions that will be really good. But remember, aggressively saving should only happen when you have paid off your debt.




Here is an example of our budget for the next phase of our lives. I prefer using excel and color coding the budget.

Account Proportion post-tax (net)  income of 80% net of both spouses Proportion of pre-tax (gross) income
household Fixed
Rent 31% 23%
Cellphone Bill 1% 1%
car payment (60-month finance) 6% 4%
Health care (co-payments, Yoga and Biking) 3% 2%
parental care (child care for others) 15% 11%
Monthly Groceries 6% 4%
car and renters  insurance 2% 2%
Utilities (electricity and water) 1% 1%
health insurance  (pre-tax) 6%
dental (PRE-TAX) 1%
vision (PRE-TAX) 0%
Uncle Sam 15%
Retirement contributions 403 or 401k  (PRE-TAX) 6%
Amex Savings (long- and short-term goals minus EF) 16% 12%
Acorns Roth plus tiaa Roth (investment for dummies) 3% 2%
Emergency fund monthly contributions 2% 1%
cable and internet 1% 1%
Car fuel (transportation) 1% 1%
charitable giving 1% 1%
Eating out and entertainment 1% 1%
Clothes and other fun shopping 1% 1%
Travel (non-reimbursable) 1% 1%
Laundry 0% 0%
Remittances- tuition for niece and nephew 1% 1%
Remittances family 1 1% 1%
Remittances Family 2 1% 1%
FAMILY FUND (contributions for funerals, health, weddings, etc.) 1% 1%
Debt free 🙂 0% 0%
TOTAL MONTHLY EXPENSES as a proportion of net and gross 98% 68%
Source Percentage of post-tax income
BOA standing
Account left over from month to month.
Spouse 1 salary after significant deductions (health care) 61%
Spouse 2 portion of salary after deductions (only 33% of income) 33%
business 1 income 4%
business 2 income 2%
Note: this is based on just 83% of our combined income. We are hoping to adjust our expenses to live on only one income in the future. Our actual tax bill to Uncle Sam is 21% this is lower because of some minor adjustments we are working on. We also recently discovered that we underbudgeted travel last year so we will need to clean that up. We are paying more on our car note to try and pay it off sooner -the actual bill is just 3% of our gross income. Although we have met our emergency fund goals, we want to keep growing it with hopes of increasing our family fund contributions as well as our charitable giving.


Just adding the colorful version here because it is so pretty 



Clean up the budget. If you have a partner the assumption here is that you are working together or as is the case in most unions one person will build the budget skeleton, then the team will sit down to clean it up and adjust numbers. I will also write an entire post on how to have the money talk with your spouse and partner. If you are living in a volatile economy,  try very hard to plan with inflation in mind or change some of your money to a more stable currency to give you some peace of mind. If this is not possible, please share some tips and strategies, you have used to stay on track.


Avoid using your credit card or loans to fill in the gaps. Access to credit can create a false sense of stability. Most financial gurus advise against using credit cards for this very reason. Use cash (checking account, mobile money, etc.) as much you can.

If you do use your credit card, schedule auto payments for the beginning of each month. I like to use credit because I get points, but I am also vigilant about paying off expenses each month. Credit cards are a trap that you should really try to avoid.

Do not budget with someone else in mind- for example, some will say Uncle X always sends money. This is a bad habit. Unless you have some reason to believe that uncle X will show up, do not burden someone else.


Cut out non-essentials and live maybe 10-20%below your means. If you cannot afford to pay cash for something, then you do not need it. If an expenditure is causing you sleepless nights, ask yourself if it is worth the stress and increase in your health care costs. If you cannot afford your car or house or house help service, you DO NOT NEED IT! If your kid’s tuition is a constant conversation in the family group, then you are probably sending your kid to a school that is out of your $ range.



Stick to the budget – I will devote a lot of time in the blog discussing some strategies for sticking to the budget drawing on my personal failures and successes. Please share your tips as well. I want to learn from you.

ADVANTAGES OF making  A BUDGET and sticking to it

You are probably asking yourself – why bother? I think about my financial health as being closely tied to mental and physical health. If you sometimes stay up late crunching numbers, then you want to do this so that you can sleep better, but we can also just list out the reasons here

  1. Know what you need to be happy – this is great for negotiating your salary. After I finished my doctorate, I was offered a consulting job at a big firm. I was super excited and too scared to negotiate, so I accepted the first salary they gave me. The salary looked great on paper, but I was not going to be able to live in expensive Washington DC on those numbers. Now, when I get a job offer, I always try to negotiate for a salary at least 20-30% above my needs or current salary. Moving is expensive, and it is often the case that the cities with great jobs tend to cost a lot more
  2. REDUCE EMERGENCIES-I really believe that there are very few real emergencies. Everything else can be planned for. Your car breaking down should not make you bankrupt because ideally, you have an emergency fund to pull from. Child Care should not give you sleepless nights because while pregnancy can be a surprise, the arrival of the baby is not. Include health care costs in your budget early on. Having conversations with mom and dad about their health care will also reduce “emergencies” in the future. Funerals can be an emergency, but weddings are really not the same as children’s tuition, graduation, baby showers, and birthday parties.
  3. Saying NO- It is a lot easier to say no to unwelcome money requests when your money is budgeted for. In future posts, we will discuss long and short-term financial planning. It is a lot harder to say no to people we love when we have what I call idle – unaccountedfor money.


DISCLAIMER: MoneyProfessor is my personal blog. I provide general information – not professional or financial advice. Opinions and representations on are my own. I am not providing financial advice or legal advice on my blog. I am only providing general information. You should consult a professional before making any financial or legal decisions.

Remittances and Black Tax 2: Dealing with and Living with Black Tax

Remittances and Black Tax 2: Dealing with and Living with Black Tax

Now that we know that there are historical reasons behind black tax –  YOU  can  STOP blaming yourself or feeling let down by your parents. Anger and guilt can do a lot of harm to the soul.

First step: Develop an understanding of your financial responsibility

Before you even have the big talk with the family about money (these rarely end well) do your math. If your family expenses are not fixed, then try to go over your spending over the last few years – itemize each expenditure and cost, for example:

  1. Health care for mom $200 every month or 6 months
  2. Rent for the parents -$200 every month
  3. School fees for your baby sister and or  niece $1,000 a year
  4. Agriculture inputs for gogo $300/year
  5. Groceries for the in-laws $500

Even if you are married, I would suggest doing this first part individually, then comparing your numbers and expenditures. You can decide on a plan together later.

Second Step: Evaluate each expense and prioritize 

  1. Is this a necessary expense? If I do not pay for it, will it ruin someone’s life?

One of our favorite married couple mentors sat my husband and I down and asked us this question. Is this an expense that we need to be taking care of? Are you the only person who can take care of your niece’s tuition? What is the situation with the parents? If they are not late, are the parents in a position to make part payments for this expense or another?

  1. Rank the expenses in order of importance

You cannot cover every expense. You have to be honest with yourself about what you can afford and what you need to be paying for. If an expense is sinking you into debt, cut out other expenditures. You are the only one who can tell you an honest story about what it is that you can afford

  1. Cut out any frivolous expenses

My husband and I realized that we were paying for a lot of things that we shouldn’t have been. I also spoke to my therapist because one time I was feeling overwhelmed, and she said – people will never stop asking for money. You have to say no. I no longer give people cash for leisure trips. I cannot afford to pay for every church trip or kid’s school trip. I also no longer provide start-up funds for business projects because as my therapist gently reminded me – I am not a bank.

A lot of diaspora friends have lost a lot of money to half baked ideas that sink your money. But this is something that you need to decide for yourself.

  1. Decide if you are giving someone a loan or a gift.


Now that you know your black tax/remittance responsibilities plug the numbers into your budget and treat that number like any monthly bill. If the money you spend ranges from let’s say $100 to $500 then you want to set aside maybe $250 each month. THESE FUNDS ARE NOT PART OF THE EMERGENCY FUND. You know you will spend this much so set it aside.

If you are consistently going over budget, you will need to adjust some things in your budget to make this bill fit into the equation.

FOURTH STEP: Family talk (only and only if you need to)

If possible, you may want to have an honest conversation with your family about how much you can afford to give them each month.  I will write a separate post with a step by step guide on opening up this kind of conversation. It does not have to be a big thing, and not everyone in the family needs to know your plans. I discussed my ideas with my mom, and that was it.


Because life happens and sometimes, we need to spend a little more – I keep what I call a Zimbabwe emergency fund. I put in $30 a month in one acorns account just for this and minor emergencies.

I do not have a foolproof plan for dealing with back tax, and I still get shocked once in a while– please share your tips for a remittance/black tax survival.





ARE you thinking about retirement? I know it sounds crazy if you are in college, in your 20s or like me in my early 30s. But no matter where you are on this journey you should be thinking about it. If you are in your 40s, 50s or 60s maybe retirement feels a little close, and you are feeling worried. Worry not – as long as you start planning today then you are not late or too early. Depending on where you are- your strategies will be different.

TARGETED AUDIENCE: Everyone with a special focus on the immigrant professional. You probably asked yourself-what the heck is a 401k anyway?

NOTE: This post is about regular retirement goals (after 60). I love the FIRE movement (Financial Independence Retire Early), but I am not sure that is for me. I have however learned a lot from the movement, and I encourage you to read as much as you can from them. FIRE folks aim to retire as early as 29 or 39. To meet those goals they live on less than 25% of their income and make so many sacrifices.


Bonus disclaimer: To prepare for this post I had two phone calls with financial advisors from our retirement management fund- you can call anytime and its free (double check to be sure), I also spoke to my bank then two financial advisor friends who donated their time. The advice was pretty consistent across the board which made me feel confident to write this blog. I have also been reading a ton of books, blogs and I LOVE reddit. However, there is a lot I do not yet know so please correct me and share knowledge from your experience.

How much do you need to retire? It depends on your current budget– you will need about 85% of your current income in retirement. Some advisors say this amount may even be too little because retirement lifestyle can be expensive.  Enjoying retirement might include traveling more (without company reimbursement), and I don’t know about you, but when I am home, I eat more and shop more. At the same time, you may already be living a debt free life – No mortgage and no debt! PAY OFF THAT DEBT! BUT our kids might need more financial help, so there is that –

BEFORE we get bogged down with numbers, let’s think about the different ways available to us to save for retirement. Younger readers- I wish I had started saving in college or early 20s. You are at the best stage to start saving. I promise 🙂

Dave Ramsey, Nerd Wallet and a whole bunch of other money smart people say you should put at least 3% of your income towards retirement. However, 15% is better – but since many of us are still starting just putting something is good. My very first full-time job did not offer me an employer match or contribution so after doing my budget and looking at my debt I could only contribute $100 each paycheck. I worked that job for two years; the employer fund had great returns. I recently checked the account in preparation for this blog and my very small contribution has grown to $6,000. Just this quarter alone I made gains of $745 – YAY! I anticipate some losses in the next few years, but I am sure it will bounce back.


  1. 401 (k) or 403(b) This is a pre-tax invest plan offered but employers. Breaking it down:
    1. Safe harbor Some employers put in money into your account whether or not you make any contributions. This is called a safe harbor contribution. These are rare but quite common in higher education. Yay to academia. The various schools I have worked for have each offered anywhere between 3 percent and 9 percent just because I worked there.

So, let us say Chipo earns $50 000/year and my employer safe harbor is 3% – each year her employer will put in $15 000 annually into her retirement plan. This is an additional benefit to your salary.

If Chipo does not add anything else according to this  401(k) calculator, she will have  $232k for retirement at the age of 67 with a 6% rate of return.

  1. Employer Match: A more common plan is one in which the employer says if you put in at least 3% of your income, we will also put in 3% this would be a 100% match. Nice. So, you put in 3% and get 3% in free money- a lot of young people lose out on this benefit because they do not put in the minimum required to get the match. Others say they will match up to 3% so if you only put in 1%, they will put in 1% if it is a 100% match.

Back to Chipo with $50 000

3% self-contribution  will be $1500/year

3% employer match $1500

Assuming a 6% rate of return starting at the age of 33 with $0 savings so far, she will have $445k in retirement. By putting in just 3% of her income, she has doubled her retirement funds.

  1. My fav situation is when you have both the safe harbor and the match. The lingo is a bit complicated- you can read more here. At a few universities, the contributions look like this

Your employer  will invest safe harbor   3% regardless of what you put in

Your employer  will then match up to 3% of your investment

You will put in 3% into your fund

Nice! Under this plan, you will get 9% invested towards retirement.

 Assuming a 6% rate of return starting at the age of 33 with $0 savings so far, she will have $697k in retirement. This is the BEST!

Benefits of a 401(k) fund

  1. Tax benefits: If you max your pre-tax contributions to the allowed amount for 2019 which is $19 000 for those under 50 and an additional $6,000 for those over 50.

You will only be taxed on (annual income-tax contribution). This includes an employer contribution.

  • You will have to pay taxes after retirement – this is when a ROTH 401(k) might look a bit more attractive.
  • How do I know what plan is best? Let your budget inform you. There are seasons when you want to reduce your tax bill by contributing more.
  1. Shelter from creditors- Most plans offer creditor protection.
  2. Employer matches and contributions – discussed above. Most employers do not contribute to post-tax contributions.
  3. Secret: You can withdraw for certain things with no fines. For example, you can withdraw money towards your first home payment up to $50k and for a medical bill. I am excited about this option (my financial advisors were too). Most of us do not have access to family loans for that first house or substantial medical bill, and this is a nice option to have. You will pay yourself back with interest, and you may lose out on returns during the time the money is out, but you can also avoid ridiculous interest rates. It could be a win-win with the right kind of research and planning. -plans differ on this so please do a double check.

Downsides of a 401(k) fund

  1. Taxed at withdrawal – you could be in a higher income tax bracket at retirement
  2. You can only start withdrawing at age 59.5.
  3. Fines for early withdrawal for unspecified reasons.
  4. Some plans have high fees. Do check with your retirement plan about the associated costs. I received a tutorial from TIAA to understand my fees, and so far I am happy with what they offer. Almost every fund has fees so you should not let this derail you too much.

A Roth 401(k)

With the Roth 401(k) you get can still contribute the same max of $19,000 but after tax. This means that when you withdraw your money in retirement, you will not owe taxes (except on the interest). This is a good option if you are in a position to pay a higher tax bill- probably great for younger folks who may have lower responsibilities early on in their career.




This is a little-known secret. It is a great tax-free way to save for future health expenses during your healthier years. Your employer offers you two or three health care plans. One has low monthly payments and higher out of pocket (HIGH DEDUCTABLE). There is usually a max for what you pay out of pocket with either plan so you will not be entirely stranded. This plan allows you to add $3, 500 for an individual and $7, 000 for out of pocket costs. Some employers will also contribute to this plan – some make a 50% contribution which is very nice. The money will grow with interest. You only need to use the funds for health care expenses, and they roll over from year to year.

Your plan will give you a list of what is approved.

I set aside $500 for our family of two the first time I played around with this. I have been able to pay for co-pays, acupuncture herbal tea, some cold medication. I have a debit card linked to the account. If the purchase is not approved, it makes a huge BING sound lol.

Keep your receipts. You can ALWAYS submit for reimbursement.

Other things with health care: Check if your plan covers things like a gym membership, yoga- you can tell I love yoga. I go every day for two hours when I can. The costs can add up quickly.



Same as pre-tax but after you have paid your tax bill. For 401 the max is still $19,000. This is an option if your employer does not offer after tax.


Roth IRA

In contrast, Roth IRA contributions are made with after-tax dollars. That is, they don’t reduce the amount of your gross income, or your tax bill, the year you make them. The tax benefit you get comes at retirement, when you don’t owe any income tax on the money you withdraw from your Roth IRA—because you already effectively paid it, back when you contributed.

If you withdraw after the age of 59.5, then there are no fees associated with the withdrawal or penalty. This means you get access to your money a whole decade earlier than with traditional 401k.


PRE-TAX – You reduce your annual tax bill by however much you put into the pre-tax plans. You will pay tax in retirement.

401(K) elective deferral plans – you can put in up to $19,000 for 2019.

HSA- If you have a high deductible health plan  you can put in $3,500 for an individual and $7,000 for a family


IRA: this is the more popular plan-you can contribute up to $6,000 per year




DISCLAIMER: MoneyProfessor is my personal blog. I provide general information – not professional or financial advice. Opinions and representations on are my own. I am not providing financial advice or legal advice on my blog. I am only providing general information. You should consult a professional before making any financial or legal decisions.



Financially Planning to Care for Elderly Parents (or parents in General)

Today’s post was unplanned. I was thinking of finishing up a series on remittances and black tax but something a friend said has been nagging me. I had written to ask if White Zimbabweans/Africans also deal with black tax. In her response, she shared that she and her siblings were starting to discuss post-retirement help for their aging parents and grandparents. Like most parents in Zimbabwe, they too have lost their retirement and their pension is no longer worth much. My friend shared that her parents were able to assist her and her siblings through college allowing her to graduate without any college debt.

Caring for parents is not black tax

While my mom did not pay for my college, she did invest a lot in my early education. I believe this set me up to get full scholarships for college which also allowed me to graduate without debt. My parents in law also did the same for their 5 boys. Perhaps it is that I will be spending a bit of time with my mom in the next few weeks or that I am seeing that my young girl is no longer so young and I would love to see her work less, travel more, do more fun things and relax. My mother as I have mentioned many times was a trader and has worked really hard her whole life. In fact, this month marks the first time that mom has been able to take a week off from work. Imagine that!

I am sure you have many feelings about your parents as well and perhaps like me you are also beginning to think of how you can support them towards retirement. I have been asking myself how I can financially include care for my mother in my financial planning. I am lucky that my mother lives in a country with some type of pension fund for the elderly, but that amount is very little. My mom and I have many open money conversations, so I feel confident knowing what she needs on a monthly basis.

The list of the ten best countries to  live for the elderly does not include any African countries.

So, for those of us with parents on the continent or other places with less secure pension funds we will need to start planning earlier in order to be able to support our parents. We really want to be in a place where we can provide care with a lot of love and very little strain. Most parents are also a little reluctant to discuss these issues because talking about money is hard and it is probably harder if we feel like the people, we love and cared for  think we have become a burden. So, do be gentle and kind, in your thoughts and in the conversation when you are ready to have it.

What are some things to think about as we plan to care for our parents?

  1. Food, utilities and other everyday expenses: Do your parents have enough finances to cover everyday finances? How much is their budget for food and utilities?
  2. Health Care: If your parents do not have health insurance through work or the state you want to make sure that you get on this ASAP
    1. Do they have any prescription medications that they need regularly? What is the cost for that? Is this something that they can afford without your help if not, have you included their care in your monthly budget?
    2. Those of us with parents who insist on working will need to very vigilant here. Our health care plan for mom in law includes good orthopedic shoes because she refuses to REST!!!!
  3. Life Policy/Insurance: You want to make sure that you have some life coverage policy that includes your parents if they do not already have one.


  1. Mortgage/living arrangements:
    1. Is their home paid off? If not, what is the monthly mortgage/rent payment is this something that they can afford without getting into debt or will you need to assist them?
      1. A dear friend dealing with this told me that it is really important not to abruptly move parents simply because we think place B will be cheaper. As people get older their community is really important, friends and a shared history go a long way in keeping a healthy mind and healthy heart. When I had this conversation with my mom, I realized the importance of her being near her church, volunteer centers, small jobs and friends. Mom’s weekly lunches with friends and singing in the choir keep her calendar somewhat full and this is critical.
    2. Do you need to make any modifications to their home? When my dear late grandmother was getting on, we had to change the bathroom and bedroom furniture to accommodate a supportive bed and wheel chair. Even in the U.K. which has public health care, this is something we had to pay for. My grandmother in law whom I adore is no longer as fit as she once was. She still loves to hike up the little Masvingo hills to do her farming – this gives her much pleasure but strains her back- we have been investigating walkers that can get her up and down. If you have any suggestions send them my way – PLEASE – we love that she loves farming, but we love her more than the yummy goodies she harvests.
  2. DEBTS – You will want to know if they have any outstanding debts that have to be taken care off. It will be awful for the parents to lose their home over small amounts that you could have helped cover
  3. TRAVEL- Parents and seeing their grandkids is a whole mission. While my husband and I do not yet have kids, I have 9 nephews and nieces and my mother would like to see all of them. Obviously, those with children will need to cover the cost of travel for the parents – if this is you then you will have to decide how often you will want parents to travel or to go and see them and the associated costs. If your parents live with you, they may still want to travel to see the other kids or go on social trips. In our case, we have tried to budget for travel to the US for both sets of parents over the next few years. DO NOT FORGET TRAVEL INSURANCE!
    1. Do they have a will? This is not an easy conversation to have but it is important.
    2. Do they have an up-to-date durable power of attorney for finance?
    3. Do they have an up-to-date durable power of attorney for health care?
    4. Does their health care power of attorney contain a health-care directive that spells out their wishes for life-prolonging care?

Planning with siblings

If you have siblings, you may want to sit down as a team and discuss these issues. I know that this is not always possible because of family dynamics. In an ideal situation, you may want to divide the various responsibilities amongst yourselves.


Remember that this conversation (even when you have it with yourself) must come from a place of love and thoughtfulness. Tell your parents that you love them as often as you can.

DISCLAIMER: MoneyProfessor is my personal blog. I provide general information – not professional or financial advice. Opinions and representations on are my own. I am not providing financial advice or legal advice on my blog. I am only providing general information. You should consult a professional before making any financial or legal decisions.

Should I Join a Money Club/Round/Stokvels

Should I Join a Money Club/Round/Stokvels


I was not planning to write about money clubs/Stokvel at this juncture but a friend and fan of the blog asked me about them and I figured why not? I love money clubs, grocery clubs, building clubs, etc. They are a uniquely African solution to challenges faced by African women (I know women in other countries use them). I actually think under the right circumstances women all over the world should use them (and men too!).

Discussions about money clubs are often controversial and get very personal really quickly so I am going to focus on how you can decide if this is a good money decision for you. One of my favorite Facebook groups with over 40,000 Zimbabwean women often has some lovely & heated debates on the issue. More power to the ladies of PH and the admins who hold us all steady.

By focusing on how the clubs work I think we avoid value judgments about the system and instead strengthen good financial habits that can benefit us if we choose to join them or use other savings strategies.

What is a Money Club and How Does it Work?

Figure 1: How money clubs work

The idea behind money clubs is very simple. Members of a group come together and agree on an amount to contribute each month. A single member of the group receives the pooled funds on a monthly rotation.

Example: A Group has 6 members named 1-6

The cycle of the club runs for 6 months

Each member contributes $100 to the club for a total of $600

Each month one member is given $600 until the cycle is complete

Money clubs have a long history in most developing countries. My mom and almost all the women in our family have been part of a money club at some point. I benefited from a money club when planned our wedding – it was a lifesaver!

Saving is HARD!

I think of money clubs as savings training wheels. It is really hard to commit to setting aside 20% of your income because life happens. As women, we know this. If mom or mom in law needs something we often have to pull from our savings, if the baby needs something for school or if the church is doing a fundraiser, we often find ourselves pulling from our savings. If our money is in a money club then we can’t reach it, so we do not have to spend away from our savings on unplanned “emergencies”.

Sometimes Banks  DO NOT WORK! Between the bank fees, poor interest rates and inflation sometimes banks are not an option. Women in Zimbabwe understand this all too well. So being a member of savings club forces us to put our money in a relatively safe option. The rate of default in most money clubs is actually quite low. I have followed over 100 clubs and only 3 have had major defaults. Banks should loan more money to women!


Before you join a money club- here are some things to consider

  1. Do you have a monthly budget?
    1. Being a part of a savings club does not eliminate the need for a budget. How else will you know what type of club works for you and how much you can afford to contribute per month

You can read more about making a budget on this post

  1. If you do not have a CLEAR budget, you may end up borrowing from other needs to cover your share of the contribution or you may end up defaulting which will be bad for the club
  1. Do you have CLEAR MONEY  goals?
    1. I want to save is not enough because if you do not have clear goals when you receive that $600 windfall you will end up with idle money which now knows is not a good idea.
    2. You will need to have clear short- and long-term goals
  2. How much can I afford to lose and how much can I afford to be without
    1. Although default rates are low things do happen so you have to check your budget to determine how much money you can afford to lose
    2. Also, determine how much money you can afford to be without for the duration of the cycle – these two numbers determine the money club level that works for you.

e.g. if you earn $1,000 a month the most you can contribute to a money club is $200- the real number is likely less depending on how much you need for rent etc. My rule of thumb is that this should be 20% or less of your income. Even when you are in a money club you still need at least $500 for an emergency fund depending on your situation. A MONEY CLUB IS NOT AN EMERGENCY FUND

If you do not have a monthly budget and if you do not have CLEAR money goals, you are not ready for a money club J

Goal setting is a private conversation between you and yourself or with your partner. As with any other money issue please be honest with yourself.

Let us look at some good examples of money goals

  1. Goal – Pay or a Wedding or DOWRY ($5,000) due 12-month period
  • This is a really good reason to join a money club. Most short-term interest rates are less than 3% (at least in the US & UK) and some accounts have high fees so, in this case, putting in a bank even when possible may be frustrating.
  • Let’s say there are 5 people in the club each one contributing $500- the receivers will get $2,500 (including their contribution). Over a 12-month period, each person will receive twice
  • As soon as you receive your payout make sure to settle at least one bill towards your end goal. Pay for the wedding dresses, pay for the cake, wedding venue – take care of other big-ticket items.
  1. Goal – buy a new stove ($1000 )due in 6 months
  • This is not the type of goal where you can pre-pay unless there is a layaway option. In this case, I would join a club that paid out as close as possible to my goal. You want to avoid idle money
  1. Goal – pay expenses related to a kid going to the first year of high school ($1500) 12 months
    • This is another great example of where you can make purchases towards the end goal as you go along
    • Each time you receive a payout purchase school uniforms, notebooks, pay your tuition deposit and other related expenses
  2. Goal- pay for adult education ($2000) due in 12 months
    • In this case, you may want to use payouts to pay tuition deposit, invest in school supplies or negotiate to move places so that you receive double the amount the month you have to pay tuition.
  3. Goal – Go home for a visit (estimated cost $3,000) in 18 months
    • If you are in the diaspora – a money club could be a great way to make purchases towards your trip home. You can buy your ticket earlier and take advantage of cheaper rates. You can buy all the gifts you want to carry with you.
  4. Goal- Starting a small business ($500) in a year
    • Money clubs are great for supporting your multiple streams of income initiatives. I have been reading that Somali expats in South Africa often pull money in this way to start up small businesses. In fact, when I asked around some of my girlfriends told me that they used funds from money clubs to fund their businesses and they have reinvested profits from the business to keep the club going. This is a HUGE win for small business.
    • In my case, we used funds from our money club to help pay off debt and stock up. Eventually, we used our payout to give ourselves a bonus every 6 months.
  5. Goal- House down payment ($10,000) due in a year
    • My favorite money club story is of 10 Zimbabwean women in Texas who used the money club to pay down deposits or outright purchase their homes. Each member of the group paid in $2000 a month for a total payout of $20,000. $20,000 was the perfect number for settling their down payments or paying off the mortgage.

Take away

So, my friend – if you are deciding whether or not a money club is right for you the answer is in your budget and your long/short term goals. Once I was done paying off my debt, I decided that I no longer needed a money club and shifted my focus to direct deposits in my savings account as well as maxing my retirement benefits. Our next major goals are scheduled for 3 years from now so if I were to join a money club, I would end up with idle money which is not good for me.

Please share with me stories about your experience with money clubs-THANK YOU!!!!

DISCLAIMER: MoneyProfessor is my personal blog. I provide general information – not professional or financial advice. Opinions and representations on are my own. I am not providing financial advice or legal advice on my blog. I am only providing general information. You should consult a professional before making any financial or legal decisions.