While growing up, most of us wanted to build comfortable lives. Some have determined that as wealth but a lot of us grew up saying, “I want to be rich”, as “wealth” was not yet in our vocabulary. As we grow older, our ideas of rich become different. What we were taught about wealth was incorrect and we learned that late. What we were not told was that what we saw as wealth was mostly debt and showmanship. As adults, we have accumulated debt through cars, clothes, houses, school fees and even food. But then there are also those who are deeply indebted and can’t point to a single thing they’ve done with the money.
Not all is lost, as this process can be reversed, there are some habits we can get rid of and some that will take time before they disappear so let’s look at some quick financial issues, we can try to fix.
Set financial goals that you review regularly
Where there are no financial plans and goals, there will be debt. Some of our parents fail to plan because they know that one day their kids will end up renovating the house; or paying for their siblings’ school fees and black tax cycle continues. We need to plan better for the next generation by having clear financial goals and detailed financial plans.
Not knowing what you spend on a monthly basis is one of the strangest things I’ve encountered. Failing to account on what goes in or out is what leads us towards debt. What keeps us in debt is not knowing which expenses to remove and which ones to reduce. When you know what you are spending on items you begin to realise that you are wasting money on many non-essentials. If companies on a weekly, monthly and annual basis account for their expenses, to know what to reduce to generate more money to pay your bonus, how do you expect to pay yourself a bonus when you don’t account?
These plans should include:
- Ensuring the next generation has a head start
- Reviewing investments
- Ensuring that your retirement plans are not behind
- Reviewing your insurance plans for the year
Get a side hustle
Under the current economic climate, a second income has become essential. Anyone one who has taken a bus ride has seen the lady or gentleman on the way to work, selling sweets or amakip-kip. That is their second income, that’s their side hustle. We have also been in offices where we are sold goods by colleagues. Network marketing has made it easy for us to have a second hustle. Whether you are selling storage containers; getting in the makeup game; or helping people lose weight, the side hustle makes a big financial difference.
Insure your income
We may hate it and see it as a grudge purchase, but imagine not having an income. I always make an example of that one successful guy we used to admire and hear stories about when we were growing up. But, along the way they had a stroke or were suddenly disabled. The same guy is now has to ask for money and rely on the generotisy of others. We will all argue that it won’t happen to us but hey, it happened to someone else, so what makes you special?
Get rich quick schemes are a myth
We have all seen them, from the pyramid schemes to forex. They do not discriminate, they affect all ages and races. However, let’s think about it, if life really had a lightning quick way to accumulate wealth, we would have all copied the formula. Thinking that we will get high returns without being patient will lead to us losing everything. We have watched over the years as many have been scammed out of large amounts of miney, and yet we still give money away, hoping for the best. Long lasting wealth that is passed from generation to generation is built over time and not overnight.
A job is not cast in stone. There could be a number of factors that lead to being unemployed. It could be as simple as you being utterly miserable, or something out of your control, like retrenchments. Not having a six month emergency fund will make us completely vulnerable. The six months gives us the cushion to know that expenses are taken care of while we look for a new job or start that business we’ve always wanted to run. Not having an emergency fund may result in perpetually bad financial choices as a result of desperation.
The difference between an educational policy and an investment is bad planning and great advertisement from the insurance companies.
We all have those subscriptions whether it be for gaming, dating or entertainment. People might say that it’s usually not a big expense when you have one. But it’s the things that fall between the cracks that matter when we strapped for cash.
They are the loveliest things and make life so convenient. But convenience comes at a premium, we are the reason why things are more expensive at the garage — that’s because convenience will have an extra charge on it. Yes sure, in some countries takeaways are cheaper than groceries. But the in country we live in, it’s cheaper to get groceries to cook, rather than ordering through an app.
Buying a Car
A car is a beautiful machine to own, but let’s be practical, if you know that you travel an average of 1,100 km a month, it won’t be a blessing but a curse. The car comes with considerations that need to be made around petrol, insurance and other wear and tear like car tyres or broken parts. Perhaps before making this big purchase, consider public transport services like e-hailing taxi services, the bus, or the train — all of which will end up cheaper at the end of the month.
It is more important to buy more life cover then funeral policy. A funeral policy will bury you and leave your family with nothing in the long term. You could get a millionaire rand life cover for the same premiums as a funeral cover but the life cover will help your family more. I always say that if the people who design the product won’t buy it, then why are we buying it in numbers?
If you are over-indebted, a consolidation loan may seem like an ideal solution, but the truth is that most aren’t able to pay off all their debt using this method. What put you in debt will also be the reason you don’t pay off all the debt. You also need to consider that your different debts have varying terms, interest rates and that the debt consolidation might have a higher interest rate and a longer term — resulting in you paying back more than the original debt amount.
It is a lovely thing introduced by the National Credit Regulator. A group of people come into your life to make it easier by reducing your payments. It stops you from going out to get more debt. It frees up more money and in theory, this is meant to help you tackle debt, but sometimes it makes people you less proactive in paying off their debt quicker.
Borrowing from friends
You have those friends who honestly need help for genuine things and those who are living their best lives and you know they will keep coming to you to borrow money. It’s a regular thing that you are used to. For them to stop borrowing money, you have no choice but to say, “no.”
We find them easier; we call them the new credit card. They have been designed to have you pay them back sooner and as you are paying them back, you have another emergency leading you to withdraw from the same loan you have spent making payments towards. The loans have been designed to keep you in debt longer. They become more expensive over time and the only winner is the bank due to the interest they have earned.
The difference between an educational policy and an investment is bad planning and great advertisement from the insurance companies. The level of experience of your financial advisor will determine what they get you. Most university student with these products know that the educational policy doesn’t go far. At most, it pays for registration and first year, leaving the person stranded in second year.
Retirement has become very expensive and the later you start the more expensive it becomes. We, as financial advisors, have started getting parents to buy retirement annuity for their newborn babies as we have realised that people are leaving working earlier and living longer.
When you start investing or saving it must be linked to a goal, whether it be a holiday or an improvement to your home. We need to be the generation that stops getting debts but plans better and has more savings goals. Investment, no matter the platform you pick.