Hey ladies, let’s gather for a moment and discuss this wonderful thing called money, moolah, the Mandelas!
But first let us proudly declare this wonderful affirmation once said by our fellow sister and Actress Miss Khanyi Mbau. “Money recognizes me. Money is comfortable around me. Money likes me. Money feels when it needs someone to talk to; it will choose me in the crowd”… and all the ”Boss babes” said Amen!
We live in a microwave world where so many things happen quickly and instantly. We’re working hard, bossing up and taking care of business while formally & informally educating ourselves on how to make even more money, but what causes us to still have less savings or investments even when our boss moves are strong? Two words; lifestyle creep or lifestyle inflation; this is when we spend more just because we make more!
Our taste becomes more expensive and former luxuries become new necessities i.e. carrying designer bags, having bigger homes and fancier cars, getting our nails done every two weeks and spoiling ourselves more often, we go through mindset changes where our happiness is centred on things that give us instant gratification and suddenly we find ourselves in a position where our financial goals have gone straight out the window.
Social media has us thinking that if we are not following the latest trends then we’re not relevant, we’re constantly consuming things that do not enhance our quality of life! So in the name of conscious spending and working towards financial freedom, we thought it would be so much cooler to put a list of financial habits every woman can adopt in order to be more financially savvy in 2022. I talked to experienced Financial Adviser Lebohang Phiri who unpacked these financial habits to help get us closer to our financial goals this year.
Lebohang Phiri is a wife, mother of two and a runner with a Comrades cap under her belt. She works for a leading insurer in the country and has a great passion for financial literacy.
1. Budget and Track Your Money
Q. In light of what we experienced during Covid-19, why is it important for us to learn how to budget and track our money post pandemic?
LP. From a financing perspective, the importance of budgeting was one of the biggest lessons to come out of the challenges that were imposed upon us by the pandemic. Many of us were caught off guard, hence the financial hardships that many found themselves in. This was a universal problem. It was not even an issue that hit individuals only. Organisations and companies were also hard hit and they too had to go back to the fundamentals… budgeting!
You must remember that because of our historical backgrounds we do not quite have a culture of saving, in fact I would even go as far as saying that we do not know how to save effectively. So people found themselves with little to no money to survive . It was only then that most people started facing the reality that they were either living beyond their means in a sense that they were too indebted, living off credit cycles to cover their day-to-day living expenses.
The basic tenet of budgeting is about matching your income to your expenses. It is important for a person to be aware of how much they are spending in relation to how much they are bringing in or vice versa. It is important to map out your goals against what you have as well. We need to set realistic goals.
In my practice, I worry when I ask people what their monthly expenses are and they cannot give me the exact figure. It tells me that;
- The person is not aware of their spending habits.
- They have no financial goals.
- They are more than likely living beyond their means and are possibly missing out on opportunities to maximise on their potential to create wealth.
We can no longer afford to be caught off-guard. We need to plan ahead and be ready for the financial shocks of life. We need to put financial plans in place and to be aware of where your money is going. A budget is about you being accountable to yourself with how you are spending your money.
2. Set Clear and Attainable Financial Goals
Q. What does it mean to set clear and attainable financial goals in 2022?
LP. First of all, know where each and every cent of your income is going on a monthly basis. Always keep in mind that it starts with the current- what you need now to survive/ live off on a month-to-month basis. Then once that is established, you also have to draw up your “desired to attain” goals e.g. buying a car, taking your child to school/university, buying property etc…
It helps to have a clear goal or to name your goal. It has a psychological effect and helps you realise the weight of your goal. Once you have a clear goal and idea of costs, you can then have to look back at what you have and how you can finance your goal/s. This is why it is important to draw a budget to see if you have any disposable income after your basics are taken care of; this will help you see if your goal is realistic/attainable or not and have a serious conversation with yourself about things that you can do without or limit spending on in order to achieve said goal.
The great thing about drawing a budget is that it helps to motivate you in achieving your goals. Setting clear financial goals has the knock-on effect in other aspects of your life – working extra hours, finding a better job, and other things that’ll help increase your income and expand your life.
3. Create an Emergency Fund
Q. Why is it important to have an Emergency Fund and how does one start building one?
LP. Back to your first question about what Covid-19 has taught us, the words Emergency Fund is what should be trending out there. We can no longer afford to be caught off-guard. We should all be striving to build our emergency pots. This should not at all be confused with savings in a bank account that you can dig into, to buy your family members gifts for Christmas. This is the fund that will provide for you and your family during the hard times.
An emergency fund is that savings pot that will not be touched. As a start I would recommend modelling it around 3 months worth of your monthly income and gradually building it to a year’s worth. It starts with us living within our means. It starts with a commitment to reducing our debts to nothing more than a quarter of a month’s salary – I’m not talking about the home loans here, but your credit card debts and other “small” loans.
It starts with us being realistic about the cars we drive. Is it necessary to drive a car that takes up half of my salary or has a huge balloon payment – especially considering the fact that the value of your car depreciates… Ask yourself the hard questions. You can start with a small amount and as and when you work through your debt, you can channel more and more towards the emergency fund. This is why it is important to seek the help of a financial adviser to guide you through it.
4. Live Below Your Means and Pay off Your Debt
Q. Why is it important for the modern day woman to live below their means so that they can pay off their debt as soon as possible?
LP. We need less debt and to establish wealth in the form of investments to fund our lifestyle. A life funded by debt is short lived and not enjoyable. Debt is a painful stressor that needs to be dealt with as soon as possible. Debt costs more and takes away the potential of building wealth as those funds could be channelled into investments. Sacrifice your designer pair of shoes today to finance your deposit for that property you have in mind in five years time. Planning can get you far. Revisit your plan on a month to month basis.
5. Set Your Own Style Instead of Following Trends
Q. Speaking of designer wear, when it comes to shopping for clothes, household items and car accessories, would you advise that women set their own style instead of following trends? If yes, how do you think that would be more financially beneficial?
LP. If your idea of style is wearing brands from head to toe, I think you need to reassess your definition of style. Style does not have to be expensive and it certainly shouldn’t be driving you into debt. This also applies to household appliances, and cars.
If you cannot afford it then leave it be. Always ask yourself what’s the worst thing that can happen if you do not have that thing that you feel so pressured to put yourself in debt for. 9/10 times you will find that, it really wouldn’t be the end of the world. Fashion comes and goes. Cars breakdown, appliances break – imagine them breaking while you are still servicing their debt. Be realistic with your goals, put some thought into your spending. Financial Goals are attainable with a bit of smart thinking… Speak to your financial adviser.