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4 Ways to be more frugal and still feel like you are living your #bestlife
Automate your savings and investment
The rich invest their money and spend what’s left. Think like the rich–invest your money first, then spend what’s left.”- Jim Rohn
This speaks to the philosophy of paying yourself first. It’s easier to say you will pay your bills first then, save/invest what is left. This hardly ever works because ‘something always comes up’ and truly speaking, not a lot of people have the financial discipline to transfer money they can spend now into an investment/saving that they will only derive a benefit in the future. Think instant gratification!
Automate it. Ask your financial service provider to have a debit order against your account on the day you get paid.
AUTOMATE, AUTOMATE, AUTOMATE. I cannot say it enough.
Create a goal that excites you
It’s easier to stick to your budget if you have a goal that excites you. A goal so exciting that you want to achieve it. Imagine the wanting to buy your first home or buy your first investment property. You browse pages of houses in the area you want, you think of how much of a deposit you want to put down, you dream of the day you move in or your tenant moves in. You visualize everything and start saving for it.
Quite frankly, if your financial goal does not excite you, it gets harder to achieve it. That’s why automating your finances is so important especially for those financial milestones that are not equally exciting, i.e. retirement.
Vacation more affordably/cheaper
If you can vacation luxuriously: fly business class, stay in 5-star hotels and still save and invest, then by all means do it. (Talk about #gettingyourmoneyright) For those still working towards their best financial life, just vacation cheaper. Instead of a 5-star hotel, look for affordable accommodation i.e. via Airbnb, Trivago, hotels.com etc. after-all, you are in a foreign land, you want to explore as much as you can. You want to soak in the culture and immerse yourself in the experiences; not stay in your hotel room!
Quality over Quantity
When it comes to clothing, quality over quantity is the way to go. Owning a few really good quality clothing items beats having a full wardrobe with items that don’t fit well and wear easily. It is far better to own well-tailored, good quality items that will last longer. You don’t have to repeatedly replace them.
This can apply to furniture, appliances, electronics etc.
There has been much talk around black tax and the negative effects it can have on one’s financial journey. Most people not only feel obliged but are also expected to help out parents, siblings or cousins. Although not an easy topic to write about since everyone’s situation is completely different, here are a few tips on how you can still work towards financial freedom while helping family out.
Communication is so important in any relationship, even more so, when it comes to your finances and family members. If your family is just used to asking for money randomly, you need to address this. It will not be easy but it has to be done.
If on the other hand they are accustomed to a fixed monthly amount and you cannot afford it anymore, be honest and let them know the reasons why. Whether it is to pay off debt or start your savings/investment journey let them know.
To some, this might seem like you are being selfish and inconsiderate, it is never easy in such situations but think of your goal and stick to your guns.
Now that you have started the conversation, be sure you prepare beforehand; come with a number you can commit to and let it be known that it is only what you can afford going forward.
If it is possible, find out what all the other family members can do, including yourself to come up with extra cash. Whether it be a side hustle or getting a weekend job or asking to work more hours at work. Do whatever it takes.
Boundaries are important for healthy relationships, set them. Please remember saying “NO” is will not be the end of the world.
It can also be a good opportunity for you and your family to learn about personal finances and money management. You can take it further by learning new money concepts together and seeing how you can implement them in your lives.
Let go of guilt
Finally, let go of the guilt of not being able to help out as much as you want or is required of you. Build good money habits that will allow you to help out better in the future without putting you under financial stress.
It can be done.
Black tax as it is called is never an easy subject to tackle, but if there is any hope of this generation becoming financially independent and savvy, boundaries have to be set. Otherwise the circle of poverty and lack of financial literacy continue.
Tribe, my hope for you this year is to be courageous in the decisions and actions you take in your finances to build real wealth. I always talk about real wealth, but what is it really? It can mean different things for different people, but since this is a blog about money… it is:
The ability to take care of your needs and family’s needs without being worried when the next paycheck is coming.
The ability to save and invest for your future
To enjoy life’s adventures and experiences
To do what you want and when you want
To pursue only the things that set your heart on fire
To give fully without thinking about how long it is till the end of the month
To wake up even in challenging situations and know for sure you are working on your calling
To do what you love and love what you do…etc
Think of your own definition of real wealth and ask yourself; what am I willing to give up to attain MY real wealth?
Tribe, it does not come easy, you have to be willing to put in the work to achieve your success, and I hope financial success is one of your goals. It certainly is my hope for you.
You have handed in your resignation, you are excited about you next move then HR hands you forms to complete on what you want to do with your Pension/Provident fund. What do you do? What options do you have?
Whatever the reason you are leaving your current employer for, you need to make the decision on what to do with your retirement fund.
Here are your options:
Transfer your pension/provident fund to your new employer
If you are starting a new job and your new employer has a pension or provident fund, you can ask to transfer your funds to your new employer. This transfer is tax neutral therefore you will not be taxed.
Be aware though, that you can only do the following transfers without paying tax:
From a pension fund to another pension fund
From a provident fund to another provident fund
From a provident fund to a pension fund
Transfer to a Retirement Annuity(RA)
This move is also tax neutral. If you have an existing RA, you can transfer the funds there or alternatively open a new one. I would suggest that before you transfer to an existing RA, you check its performance and costs first. You don’t want to put your money in a non-performing and costly investment.
You must note that, with a RA, you cannot access the funds until you are at the age of 55. I believe this is for your benefit, you don’t want to use up your retirement money before you retire! An RA also has tax benefits to it too.
Transferring your funds into a Preservation fund.
What is a Preservation fund?
It is a retirement fund in terms of the Pensions fund Act. It allows you to transfer your Pension or Provident fund when you leave your employer. The transfer is tax neutral as well.
Unlike with the Retirement Annuity, with a Preservation fund, you do have an option of one withdrawal, either the full amount or part-withdrawal from the preservation fund. If you ever decide to exercise your option to withdraw from your preservation fund, you can never touch those funds again until the legal retirement age of 55.
Withdraw your funds in cash
It’s unfortunate that a lot of people go with this option. Draw your funds in cash and pay a heavy tax bill. Oftentimes people say they want to pay their debts/ liabilities with these funds, commendable to want to pay off your debts but now you have also just robbed yourself off a couple of years of savings!
If you have never taken any cash before from your pension/provident , the first R25,000 is tax free, then tax is charged on a sliding scale.
Please see the table below:
Tribe, what option have you excised when you left your employer? What impact has it had on your future for retirement?
Financial Coaching is a relatively new concept in SA and perhaps you wonder what you would gain from a coaching session? Or how different it is from a financial planning consultation, right?
Below I am going to highlight some of the benefits you can derive from a one-on-one coaching session:
It is not a financial planning consultation. With a financial planning consultation, the focus is on which products you have and if you need a specific financial product to meet your needs. With financial coaching, the focus is not on financial products. Coaching encourages you to create a clear vision for your financial life and create goals that resonate with your highest priorities.
Financial coaching educates and encourages you to be your own financial planner. You are empowered with financial tips, tools and techniques to approach a financial institution with confidence.
Financial coaching is different. It focuses on your education, growth, and decision making process so that you master wealth building skills.
You remain in control by learning how to manage your money smarter and make better informed investment decisions.
You walk away knowing exactly what is going on with your finances and a clear action plan on what to do next.
And lastly, your information is kept confidential.
Want to be accountable for your money decisions and build real wealth? Go here.
The New Year is upon us! With that comes feelings of renewal, hope and many people set New Year’s resolutions to either start going to the gym, eat healthier, further their studies etc, but how often do we set a goal or a new year’s resolution for financial success?
Remember, whatever stage of your financial life you are at, with what you have; you can work towards a financially successful life. Develop a positive money consciousness and work towards your goals.
Here are 6 areas you can start with and grow from there.
1. Fall in love with budgeting
A budget is the cornerstone for a healthy financial life. You cannot feel in control of your money if you do not know where it’s going. Do your budget regularly and let it speak to your highest priorities.
2. Set a goal to increase your savings
Get crystal clear why you want to save. Create a goal that inspires you to want to reach it. A good tip is to not use your everyday bank account for your savings, open a different one altogether for your savings. If you don’t, you will probably end up using the funds on things like dinners, drinks and clothes!
3. Set a goal to have an emergency fund
As I have said before, there is no one who has never had an emergency, whether small or big, it is an inconvenience if you do not have money set aside for the unforeseen financial disruptions that do happen in ones life.
Commit to building your emergency fund today, you can start small and build from there; but just start.
4. Set a goal to start investing/increase your contribution towards your investments
Remember, unlike savings which are short-term, investments are long-term.
You should at least strive to have the following investments:
A Unit Trust
Tax-Free Savings Account
Hopefully, overtime you will gain the confidence to move to other investments such as shares, investment property etc.
5. Set a goal to save/ increase your retirement fund contribution
It’s never too early to start saving for retirement. Here’s the thing, should you live long enough, you will retire one day. As the statistics go, only 6% of South Africans are able to retire financially independent, the rest have to continue working, get government assistance or depend on family. I don’t know about you, none of the other options sit well with me.
So, do yourself a favour start a retirement annuity or if you do have an existing one, increase your contribution at least every year. If your employer offers a Pension/ Provident fund also see if you can increase your contribution towards it.
Retirement funds also have a tax benefit which I will write a blog about soon.
6. Set a goal for personal development
What are you good at? What do you believe about yourself that perhaps only yourself, your family or close friends know you are good at? Why have you not explored your talents and shown them to the world? This New Year, commit to not hiding, show up, put yourself out there and see good things happen. Do not be afraid to ‘fail’. There is growth and learning to be found in ‘failure’.
If you want to study further, do so. If you want to start a business, dive right in, don’t wait for the perfect moment, it will never come. Just start. Give yourself permission to do what you love.
What financial goals have you set for yourself in 2018 and how do you plan to achieve them?
Congratulations on becoming your own boss! While the benefits of being your own boss are evident, i.e. control of your own time, making your millions and possibly a lot more quicker than when you are employed and just the flexibility that comes with it are attractive; there is however another side to being your own boss. The lack of certainty for your next paycheck, lack of employee benefits ie Pension fund, medical aid etc. Being your own boss can be tricky. Below are a few tips on how to manage your money in your new role:
1. Get organized
It’s easy to get caught up in the rat race of chasing your next invoice and trying to get new business. You need to have systems in place for administration (which I have to say, I loathe!), your personal finances and your business finances. Get an accountant involved early on so you don’t miss any important steps that might slow you down later, i.e. your business and personal taxes.
2. Know exactly what it costs you to run your life (Income Vs. Expenses)
I know a lot of entrepreneurs who use their business account as their own personal purse. While I know that the lines between personal and business can be blurred as a start-up, try build the discipline not to use the business card for personal use. Imagine an opportunity arises for you to either partner with someone or be bought by another company and voilà there on your bank statement, a purchase of a red glass of wine at Tashas on a Friday afternoon! It just doesn’t look good for any investor!
Rather, pay yourself a salary that goes into your own personal account. Let your business card be just for that, business. Know what it costs for you to live, so do your budget and stick to it.
3. Don’t put off saving or investing
It is so tempting to put off your investments when you embark on your entrepreneurial journey! It’s easier to say I will continue with my investments once I start making the big bucks!
Instead of putting investing/saving off altogether, reduce your contributions to the minimum until you can get back to the level where you feel comfortable with. Remember the two ingredients to successful investing: starting early and/ compound interest.
4. Get insured and stay on a medical aid.
I don’t know why insurance is such a grudge purchase for most people but when a bad situation happens, it is exactly what you need. As a businesswoman, you need to insure you against those bad situations so they do not put you under a lot of financial strain should they happen.
5. Know your worth!
I speak to a lot of entrepreneurs who offer really great services and products. They put in the hours to hone their skills, expertise and knowledge but are afraid to charge a fair price. They often discount their services or products then they get frustrated. I know you have probably heard this but know who your ideal client is, speak his or her language and don’t try serve every single person out there. You will attract YOUR kind of client.
Are you an entrepreneur? What has been your experience with your own personal finances since becoming your own boss?
The festive season is fast approaching and with all the braais, cocktail lunches with the girls, travelling with family and the Christmas lunch, your budget can easily be thrown out the window, giving you a financial hangover come January.
Here are some tips to stay on top of your finances throughout the holidays:
Budget for your holiday expenditure
It’s easy to throw caution to the wind with all the festivities happening this time of the year. To remain prudent, create a ‘special’ budget for the holiday season. Besides the normal month-to-month expenditure, a big chunk will be allocated to entertainment. While this is fine and you are allowed some down time, spend only what you have. Don’t go into the red over #December to only feel the pain in the New Year.
Have January in mind
Further to budgeting for your holiday spend, do a January budget already. This will give you a clear picture of how much you should actually be spending and also put away for the month of January….we all know January can be a looong month if you don’t budget well.
To save you from your own weakness of over-spending, perhaps it would be a good idea to transfer some funds into a different account from your normal day-to-day bank account.
Pay off your debt
If you are lucky enough to have your bonus paid now in November or December, pay off your debt or at least most of it. I know it does put a damper on the fun spirit of the festive season to be talking about paying debt when you should be having fun, right? But, you must hold yourself accountable, pay your debts and start off the New Year on a good financial note.
Enjoy your holidays
It is indeed a time to spend quality time with friends and family, have fun and relax. It does not have to be expensive though. You can opt to entertain the kids in an affordable way like taking them to the park or having a picnic in your very own backyard etc.
Christmas gifts can be costly, so don’t even try to compete with that rich aunty who buys the coolest gifts, don’t do it! You can agree with family members what the budget for gifts should be; something affordable and thoughtful.
How are you making sure you don’t over-spend this holiday season tribe?
In my workshops and speaking events, women always ask me: “how do I invest”, “which investment should I pursue”, “which has the highest return” etc. There is no one size fits all type of investment. However, there a few principles that make investing less intimidating.
Below are 5 of my favourite principles that make navigating the investment landscape easier:
HAVE A GOAL IN MIND
Doing anything without a goal is like running a marathon without the finish line. To achieve anything, one must have a goal. Circumstances and environment may change but the goal should never do. So start with your WHY. Why do you want to invest? If you invest without a goal, you are more likely to stick it out through the good and bad times. You will not make withdrawals on a whim as an when you please.
Goals instil in us the discipline to achieve what we set out to achieve. START WITH AN INVESTMENT GOALS.
INVESTMENT TIME HORIZON
Legitimate investing is not a get rich quick scheme. As I have mentioned above, you need to start with a goal in mind and realistically think how long it might take. If you are investing for your 2 year old child’s university education for example, your investment time horizon is more than 10 years, this is long-term and you therefore will not want to stress yourself too much about market volatility. On the other hand, if you are saving for a deposit on a house you want to purchase in one or two years’ time, you will invest in a more risk averse instrument. Something more liquid and easily accessible.
KEEP COSTS LOW
I have seen too many people invested in what does not serve their goals. They merely have a financial product but do not know what its purpose is. Scrutinise all costs that come with your investment, negotiate if you have to, to bring the cost down. Remember, costs eat away at your investment.
INVEST IN WHAT YOU KNOW
I cannot stress this enough: educate yourself, educate yourself. DO NOT leave your financial wellbeing to a financial advisor, partner or financial institution. You have to spend some time educating yourself on different investment options so when you do make a decision to invest, you know the basic principles. Go to wwww.womanandfinance.co.za/blog to read more of our articles on personal finance, our articles are for education’s sake only, they are unbiased and product free to ensure you get the best information. Invest in something you can explain easily to your friend/ aunt/ mom!
I know a lot of women forget this last but very important stage of the investment circle. Review your investments at least once a year to assess if you are on track to meet your objectives and to check if you need to make any changes.
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