“New year, new me..” Here we go again…(queue the deep sigh)
As has often been the routine of years gone past, January makes for quite an interesting month that involves the clearing of minds and dusting off our festive smiles and cheerful vibes, for the start of our respective responsibilities for the year(those annoying back to school anthems). Except this year like no other, the entire framework has been twisted on its head like something from WWE. (Insert image of a Batista bomb in your mind).
If you read last months issue, I have made a sacred oath to guide and hold your hand gently through this COVID maze of uncertainty, confusion and fear, as best as I can. Most have called me a wealth manager saint, but that’s not for me to judge. (I am!)
Before we begin on this journey it goes without saying that this article will take a more serious look at the way we have planned our financial goals in the past and how under these current circumstances we should be aiming to do the same. (If you only have R27 in your account at this stage, I did warn you and you didn’t listen!!)
So, take this short yet informative journey with me and let’s see if by the end of this article you can find strength and reward in your financial journey and goals.
Budgeting Principles:
If you remember Rich Amanda as well as Poor Amanda, you will understand the importance of breaking down your income into percentages. What this means and the secret of the wealthy is that before the income hits their bank accounts it has already been allocated into percentages which helps you track your spending…you with me? If not take a look below at what I’m referring to.
It always makes more sense in pictures they said…So with this clear picture in your mind, during times of uncertainty we have to be able to hold more cash (liquidity as it’s referred to by “smart” people with expensive suits). In simpler terms, you have to be able to have access to money in case something bad or good happens. CASH IS KING or QUEEN…
Some guidelines as to how to implement this:
Before you buy that item, take a day or two to think about it
I have spent countless unnecessary amounts of money on impulse buys where I had come into the shop to buy a carton of milk, but somehow left with a new pair of socks, face mask essentials, a DIY cleaning sponge, new pillow cases and an issue of the latest GQ..(And lots of chocolate). And with the ease of online shopping you never really see the money or generally like we all do just ignore the sms…which doesn’t help my brother
Increase Emergency Fund percentage
Rich Amanda being the smart, independent and strong woman she is (who takes Khaya’s advice seriously might I add) was adviced that it is the time to increase the percentage of money going into the Emergency fund. On the pie chart she went from 10% of her monthly income to 25%. She now saves R2500 a month to a separate savings account that we call her emergency fund. Simple enough?
In the next coming months regardless of the way our beautiful country and all its people are able to deal with the pandemic on a medical front, the state of the economy and and the financial security of all people will be tested (see what I did there), and the ones who will survive will be the ones who have access to cash for a number of reasons.
Discipline, Discipline, Discipline
My advice though light hearted is meant to guide your financial thoughts and goals towards the direction that will help you thrive and enjoy the joys of managing your finances. The truth of the matter is that it is now, more than ever important for you to be clear and decisive on how you manage money. Whether you want to be a musician, writer, doctor, accountant, fairy or a mermaid, the future of your financial success has a lot to do with how you manage periods of uncertainty.
I will conclude this article with a story I would like to share. It’s about one of my clients who because of his public profile I will not mention by name but I will call him Mr Public Figure and his wife of 6 years, Mrs Public Figure. The Public Figures( as we will refer to them) where in a very comfortable financial position with the Mr having put himself in quite a lucrative position in terms of his network and connections at the end of 2019. The Mrs on the other hand being a little bit younger than him, had a taste for the finer things, which I completely advocate (we all love nice things papa). They had come to me by accident. Only the few come to see their wealth manager in times of festivity. No one goes to see a marriage lawyer when they are happily married type of thing.
Nonetheless the Public Figures left our meeting incredibly frustrated with me. They wanted to hear the words, “yes, go and spend your money freely” but found exactly what they were paying me for….sound advice that is focused on the future, especially on building wealth for you and your family. The earlier you start this journey the better. I adviced them to put almost 50% of the capital they had received into an emergency fund because I told them that interest rates would be cut and they would be able to get better loan terms to buy a house on more favourable interest rates, known as the prime lending rate. Long story short, today because they had more cash then the average household during pay cuts and job cuts, they live in an estate and our darling Mrs drives a beautiful Mercedes.
Discipline and setting realistic goals is the difference between joy and sadness!