Since you were a little boy/girl, your dream was to drive a fancy car that gets noticed. Maybe it was a fire truck at first, but then became a Ferrari. In red. Of course. How about sipping cocktails on an island for 3 weeks, with the girls, instead of visiting the parents’ holiday house in Stillbay each December?
As you start your first job, you work towards that goal. With the first paycheck you get, you smell the leather seats, and you taste the sweetness of the strawberry daiquiri. After 10 odd years of slaving away behind a desk, your credit limit is of such that you can get the finance for the car, and the credit facility for the dream holiday you’ve been planning. And off you go. You made it!
You have accomplished BIG things in your life, and as human nature is, we need to share that with our friends. Thanks Facebook! We celebrate life. We go out, we toast to our goals being reached. We eat sushi, we braai, we pour wine and whiskey, we get a dog. We also get someone to help us maintain our gardens, and do the dishes. We get DSTV. We need Internet. So we get that. We need new leather couches. A king size bed. Egyptian Cotton bedding. Fluffy pillows. All on credit. Because we deserve it. And we are right. We do.
It has now been a year since you “arrived” and your Financial Planner sets up an appointment with you to review your policies. In this meeting you get told that if you are involved in an accident with your new car, Ferrari or not, the excess payable by you is R3500. Immediately you think to yourself: what if this happens after the 20th of the month? How am I going to pay this? By that time you have paid your car, rent/bond, insurance, electricity, DSTV, @ Home, bought some necessities for the fridge for the month, and have some spending money left to survive until pay day.
You are choking on the credit card repayment for the holiday that is long since forgotten.
No one ever told you this should be part of your dream! All of a sudden growing up is the worst thing you have ever done.
On top of all of this, you/your wife falls pregnant. According to Women24, it costs an average middle class family in South Africa roughly R90 000 per year to raise ONE child.
How do we deal with these scenarios? How do we prevent playing catch up?
Baby steps. That is the answer. Don’t ever think that you are alone in the situation. Statistics show that approximately more than 90% of South Africans fall in this category.
Start focusing on short term. If you only look at Long Term savings eg Retirement, it still doesn’t solve the problems of today.
Your goal should be to work towards having 3 months’ worth of income as a short term, easy accessible, risk free nest egg.
My advice will be as follows:
- Register on www.momentum.co.za – you do not need to be a client of Momentum to use this facility.
- Complete the Financial Wellness Questionnaire on the website to assess where you are in your current financial planning.
- Get control over your finances. I am using a fantastic tool that has helped me greatly – Multiply Money. This is available via your App store. Here you can record your income and expenses as well as keep track of it.
- Work a set savings amount into this new budget. You can start with R100, R300 or R1000. It will depend on your budget. But, start with something.
If you need ANY advice, do not hesitate to contact me on firstname.lastname@example.org
A big part of financial freedom is having your heart and mind free from worry about the what-if’s of life ~ Suze Orman
(Originally published on 7 June 2015)