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A man is not a financial plan - save!

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08 Aug 2012

As women, we do not need to use men as our financial plan, instead, we should be responsible for our own finances and save for old age.

Author, public speaker and marketing development manager for Old Mutual South Africa, Sylvia Walker, says when it comes to money and handling finances, it is important that we adopt a mind shift towards money. Think freedom planning and not financial planning – savings are opportunities waiting to happen.

Here's how...

The very first thing to understand about money is that it is a means of exchange. We work hard from 8am to 5pm and at the end of the month, we get paid for our services.

However, this money does not always stay in our bank accounts, as soon as we get an sms notification about the salary being paid into our bank accounts, more notifications follow.

Car debit, home loan, personal loan, insurance policy debit orders soon run and before we know it, we are back to zero and waiting for yet another month-end. Sounds familiar?

Whatever you wish to achieve, be it buying a new home, going on holiday somewhere exotic, buying a new car or simple updating your wardrobe – you can do it.

The trick is to make your money work for you and learning to manage your finances in a practical way.

Author, public speaker and marketing development manager for Old Mutual South Africa, Sylvia Walker, says when it comes to money and handling finances, it is important that we adopt a mind shift towards money.

Think freedom planning and not financial planning – savings are opportunities waiting to happen.

“Know what you are aiming for and understand what it will take to get there.

Walker does not mince her words when she talks about the importance of saving.

She puts it bluntly that as women, it may be fine now to swap plastic money whenever we see bling, the harsh reality is that we are going to get old and that is an ugly truth – think old, wrinkly and very broke.

She says it’s all a matter of time and disciplined saving.

“Those who start saving early and allow themselves enough time to reap the results will benefit in old age.”

Walker points out that one of the valuable tools anyone can use to ensure a financially carefree retirement, is to start saving as soon as possible and to continue saving for as long as possible.

In other words, give your retirement money enough time to earn the critical interest on interest.

But while we are still young and not close to retirement, we are modern women after all, and we want it all.

A designer wardrobe, hot career, weekends away and international travel.

All of these things coupled with long-term savings for retirement are possible provided we manage our money properly.

Here’s how:

Draw up a budget

Old Mutual says understanding your spending habits is the key to saving.

A budget gives you a snapshot of where your money is being spent and enables you to commit to a monthly or yearly amount you can dedicate to achieving your goal.

Prioritise your debts and decide to pay off one in full starting with the next most expensive (the one with the highest interest rate).

When that debt is repaid, take everything you were paying into it and add that amount to that debt.

Continue like this until you have paid off all your debts.

Pay yourself first

According to Old Mutual, this is the most important lesson you will ever learn.

Think about it this way, before you pay any debt or anyone for that matter, make a payment to yourself and this money should go straight into your savings and not buy another pair of Jimmy Choo shoes.

Your budget sheet will show you how much you can afford to save, but if you take a minimum of R500 and put it into your investment, BEFORE you buy anything else, this will create a habit of investing that will stand you in good stead forever.

Choose how to invest

While not all of us can tap into the Johannesburg Stock Exchange (JSE) directly to invest, Old Mutual says it is possible to save for one’s goals through the bank, via an endowment plan or through a mortgage bond – however, unit trusts offer great benefits.

Unit trust benefits include:

1. Accessible – you are not locked in

2. Flexible – you can miss a monthly payment with no penalties

3. Cost effective – there are no upfront admin fees

4. Immediate – your money works from day one

5. Hard working – your money has the opportunity to grow and your capital benefits from compound interest, which over time, continually adds to your investment.

Choose where to invest

Now that you have gone through all the above steps, you have to choose where and with which company to invest.

Walker recommends that would-be investors do their homework and invest with reputable investment companies.

Banks' financial advisors can also provide tips on their various offerings.

The JSE is a minefield of information on how to invest - click here to learn more.

For those who want to invest in unit trusts through Old Mutual, the company has created the Classic 5 Investment Collection – investment vehicles for most types of investors.

Read more here.

Do something

Reading all this information is all well and good but if you do nothing, you will earn nothing.

There is no such thing as passive income, says Old Mutual.

The last step is to stop and recap what you have read, written down and start imagining that big goal.

It could be a new car, a dream home or holiday, and having done the above means you have taken one giant step closer to achieving your goal.

The truth is if you can dream it, you can achieve, never depend on a man for your financial freedom, you have the power, so use it to create your own financial freedom.

Look out for the next article on ‘Taking control of your money’.

Until next time, happy savings and this Women’s Day, think freedom planning and not financial planning. – Denise Mhlanga

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