Question: I lost my employment and now relying on my wife to foot the bills. She injected a lot of money into a farming business that collapsed due to the Covid-19 pandemic. How do I get myself out of this muddle? Is it wise for her to take a loan to help me start another business?
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Thank you for writing to us and sharing your current financial dilemma.
Sorry about your job loss. Losing employment during these tough economic times must be very hard on you. We can only imagine how tough things must have been in the recent past.
You have not given us details of why you lost your job. A job loss may be caused by reasons that are about you or otherwise. One can also lose their job for reasons that are far beyond their control. A good example may be a result of the effects of Covid-19, which have been felt worldwide.
No economy was spared, whether developed or otherwise. To try and manage operational expenses, some employers opted to retrench part of their staff.
Other entities had no option but to close down completely. You may have lost your job through such corporate decisions.
We just hope that your loss of employment was not related to you voluntarily quitting your job to simply start a business. There are very many things that one must put in place before such a move.
We feel urged to probe this further because you have mentioned a farming business that collapsed and further, your dilemma of whether your wife should take a loan to help you start another business.
Nevertheless, before we do a deep dive into this, allow us to take a moment to first appreciate your wife.
You have mentioned that you rely on your wife to foot the bills and that she injected a lot of money into a farming business that collapsed due to the pandemic.
Your dilemma also points to the fact that she would still be willing to take another loan to help you start another business should this be your next preferred course of action.
We are living in tough times and many marriages rarely survive what you have gone through. If there is a way you can thank her, please go ahead and do so. Let her know that you truly value her support.
Diversified family income sources
The financial dilemma that you are going through points to the importance of having diversified income sources as a household.
You have weathered the storm this far because both you and your wife had separate sources of income. You can imagine what the scenario would have been if you were the sole breadwinner and then you, unfortunately, lost your job.
We would want to urge all readers to give this recommendation some serious thought, especially those who are in households where only one spouse is working. It is recommended that the other spouse tries his or her hand at some income-generating activity to diversify the household’s income sources.
Job scarcity is real and so is unemployment, but this does not mean that no work can pay. However, little the income may be, the amount is still worth the earning.
An open mind will soon explore bigger and better opportunities, and with time something better will eventually come your way. Rome was not built in a day. Every successful business has a story that relates to a humble beginning. It is better to keep trying and failing at something than to succeed at nothing.
Failure today still leaves a residue of rich lessons learnt and soon you will be wiser for your next opportunity. You will still be better off than if you never tried anything at all.
Emergency fund
The next thing that we would want to emphasise for those who currently have stable sources of income is to work hard to build an emergency fund.
One may ask how much is required to set up an adequate emergency fund.
Some experts recommend that a good emergency fund should be at least six times one’s net income. This sounds adequate because it points to the fact that should something drastic happen, you will be able to continue with your life normally and still meet your financial obligations for the six months as you think of your next step.
There is no mention of an emergency fund in your case. Having an emergency fund would have given some relief to the financial strain that you are currently experiencing as a couple.
Starting a business? Use savings or loans?
Whereas we commend you and your spouse for the bold move of starting a business, we regret to note that your farming initiative collapsed. There may be a need to have a sit-down with a qualified financial expert to review all aspects of why exactly the business failed.
Lessons from that failed business should not be allowed to go to waste. A careful examination of the cashflows, your go-to-market strategies and all aspects of how you managed your operations may give you great insights that can be useful for your next business attempt.
All the best with your next move.
Financial experts have always strongly discouraged the idea of taking a loan to start a business. It is recommended that the seed capital one uses to start a business be sourced either from personal savings or from another family's financial assistance but never through a loan.
Going by available statistics, there are over 60% of new business start-up failures due to varied reasons. This means that it is safer to start a business with your own funds than with a loan.
Build a Savings Pot
You have not mentioned any available savings either accumulated by yourself or by your wife. I would recommend that you consider building a savings pot first before you can start another business.
Should this next business also fail, the pain of losing your own money is less compared to losing money borrowed from a loan.
For ideas of where and how to save, please do not hesitate to seek the good advice of a qualified finance or investment professional.
Oyuga is a financial literacy trainer and General Manager at Umbrella and Retail Retirement Solutions at Zamara.
