Nikolay Ivanchev is a business and tax consultant, a specialist in business structuring and tax optimization. Member of the Board of the Chamber of Tax Advisors in Bulgaria.
Mr. Ivanchev, you claim that if the state were a company, no bank would give it a loan. Why?
Because when you go to a bank, it examines what goals you have, how you spend your money wisely, and what future the company itself has. And when you show that you can’t manage your money wisely, the only chance you have to survive is by taking on new debt. There is no bank that will say, I agree with you and give you new loans.
What does “smart money management” mean from the state’s perspective? Since the beginning of the transition in Bulgaria, we have been talking about fiscal decentralization, yet it still hasn’t happened. What actually needs to be done for our money to be managed smartly?
Smart means, first and foremost, reducing the excessive role of the state in public spending. Currently, if the state redistributes 50% of public funds, it should be brought down to 30–35%. The second step is decentralization—allowing municipalities to manage and spend their own money wisely. And of course, thirdly, we must strive for balanced budgets. We should at least break even—let’s not aim for surpluses yet—but we must stop taking out new loans to finance flawed policies.
How can this happen in the absence of an active civil society and a middle class that is shrinking with every passing year?
People must try, in some way, to build their financial independence through smart investments. Once we succeed in this—and we are talking about at least 10% of the population—we can create a foundation upon which to move the entire country forward. There is no other way. Currently, the number of people who are financially stable and can freely make decisions and participate actively in civil initiatives is far too small.
Isn’t education at the very core of this financial independence? Yet, despite the state pouring massive resources into it, we are still not seeing results.
You asked the question and provided the answer yourself. We are pouring money in and getting nothing in return. During the final years of schooling, the specialized subjects should be significantly reduced. Schools must make building financial literacy mandatory, regardless of the specific profession students are being trained for. Furthermore, they need to be prepared to become entrepreneurs—people who want to develop businesses and invest—rather than just aspiring to a salary on the government payroll. It simply cannot happen any other way. It is vital for education to start seeking concrete results and preparing students for the realities of economic life.
You are asking the question: Where are we headed? This is especially important when we analyze the economic situation. Where is the Bulgarian economy going?
Unfortunately, if we do not immediately end the state’s large involvement in the redistribution of funds, if we do not start transferring these funds to civic initiatives, finance, education, and support for small businesses, we are not going in the right direction.
We are currently once again witnessing a sustained increase in inflation, stagnation in most sectors. Some attribute it to our entry into the eurozone, others to various internal factors. Are we on the verge of a new financial crisis?
The big problem is that financial crises in Bulgaria are often imported and are, in fact, directly dependent on European developments. If a financial crisis occurs globally or in Europe, it will inevitably reach Bulgaria as well. So, if there is one there, there will be one here too. However, the real issue lies elsewhere. We are moving in a direction where we might create too many financial difficulties for ourselves simply because we refuse to reduce the state’s involvement. Many people in our country still believe that the state should redistribute an even larger share of our money and take decisions to expand the government administration—which inevitably stifles private business and initiative. Therefore, I do not believe we are currently on the brink of a financial crisis. We rank 27th in the world according to the wealth index. But we can live much better with smarter management of our funds.
What is your advice to retail investors? Where should I put 100 euros of my salary tomorrow?
I will quote Buffett, who is considered the greatest investor of all time. He says: ‘If I were 20 years old today and had no financial knowledge, I would invest $100 every month into a broad index of the top 500 companies in the U.S. (the S&P 500). I would do it consistently every month, and by the age of 40 or 45, I would be financially independent, able to retire and pursue my dreams.
