The secret to money

2012-12-28 07:59

Cape Town - Old Mutual’s On The Money financial management programme, which targets mainly lower-end to middle income earners, helped me understand that the secret to being financially independent does not lie in earning a lot of money, but rather in learning to manage the money you already have.

It made me realise that the money you have can double in value if it’s used wisely – this means avoiding spending money that you still yet to receive; learning not to live on credit and committing to get rid of debt. Moving from being over-indebted to be financially independent takes a change of mind set and that is not always easy to achieve.

The course bases its money concept by simply looking at each bank note where you see that each note represents a member of the Group Five animal kingdom, and each animal possesses a character trait that we can adopt to better manage our finances. 

On The Money focuses on behavioural change and mind set change of consumers in handling their money. “Its aim is to foster a sense of financial management planning in a non-intimidating and non-paternalistic ways to people who want to improve their financial literacy. The Big Five is the most appropriate tool to use in teaching people financial management principles, as it is most familiar to them”, says John Miyake, Head of Financial Education at Old Mutual. The programme is accredited and has been incorporated into many training programmes by corporates and public sector.

Entrenched in the programme are five key financial management principles such as; budgeting, getting rid of or properly managing debt, setting out clear financial goals, having a plan and being disciplined enough to stick to that plan. It is a proven fact that successful people have given time to allow their money to grow. Investors get jittery when they see the market not performing well, what they fail to realise is that savings is a long-term commitment.

Overall, the course brought home three aspects that financial freedom takes willingness, commitment and loads of discipline. This does not mean you’ll always get it right, but having a goal to achieve helps you stay on course.

For more information: www.oldmutual/   or On The Money call centre 0860 388 873

What you can learn from the Big Five

The Lion pays himself first. The secret of a lion is that the male lion stays behind when the female lion and cubs go out to hunt. When they get back, the male lion eats first. The principle behind this is that you need to pay yourself first by saving the first portion of your income before you pay off anything. You need to have an emergency savings fund or a particular goal, preferably set up a debit order. You can create a savings account with the bank, a money market account or even a stokvel. You need to have some money put away in case something comes up unexpectedly.

The leopard remains focused: The Leopard is known for its powerful vision and focus; it aims at its target, whether it’s a weak or sick animal. It will not be distracted by anything else once it identifies its target. 

That is planning, that’s how we should be with our savings plans and goals. When we do plan, but don’t stay focused we can easily be distracted and get off track because we are not focused enough and do not have a clear vision of why we are saving in the first place. Have a vision that’s backed up by a concrete, achievable and realistic plan. 

Also get support by having one person hold you accountable. Keep your vision or goal in front of your eyes. Old Mutual has an imagination exercise where they train people to do things while their eyes are closed in order to create this vision.

The elephant never forgets; it knows what it is spending: The elephant never forgets; it has a good memory. Adopt this mentality when it comes to your budget and expenses. Know how much money you earn, who you owe and how much you have left. The only way to know this is when you write down your budget. List your creditors each by name, this will make it more tangible. 

Find ways to cut back, for example it is proven that people who pack lunch at home save more than those who buy lunch at the cafeteria. “If you buy lunch at work, you could be spending about R1 000 every month and multiply this by 12 is R12 000 a year”, says Miyake. 

Learn to know what you earn and how much you spend by looking at your bank statement. Get into the habit of doing budget annual review exercise.

The rhino charges down debt: The rhino charges head on into the threat. This is the attitude we need to have when tackling debt, we need to charge at it head on and get rid of it. If for example, you owe five debtors, tackle first the most expensive debt. 

This is the debt with high interest charged such as your credit card or store card. Share your problems with the people your trust, those who will assist you. Create strategies to deal with debt and get rid of debt. Do not replace debt with another once you have paid it off.

The buffalo find strength in numbers: Buffalos go in big herds and that’s where their strength lies; it’s in numbers. Savings is a long-term view; give it time to grow if you want to reap the rewards. Carefully plan your savings plan and take into consideration the power of compound interest. 

 - Fin24

  • arno.pfohl - 2012-12-28 17:48

    I would just like to add a few points. 1) So let me get this story straight, if I hypothetical have 1000 000 rand and the bank gives me interest of 5% per annum and inflation is 6% then I am essentially losing 10000 rand(6 - 5 = 1% which is 10000 rand) per annum. And yes we all know that inflation is not really 6% more like closer to 10%. 2) The salary I earn is adjusted to the current economic climate, so the value of goods that I buy essentially goes hand in hand to my salary. So hypothetically I want to buy an apple for 1 rand but decide to buy the apple instead 2 years down the line to buy more apples but now the apple is 4 rand. You are better off buying the apple at the beginning now apply this logic to buying a house, you will save and save and you will never get to your deposit for the house unless you are earning reasonably. Essentially what I am trying to say, is spend your money as soon as you get it on possibly goods that have value in the future, good example would be whiskey. If I had an option I would not put money in a bank at all, but keep money in cash to avoid bank charges, tax on interest rates, and low interest rates. Lifes a gamble blow it on the stock market.

      Commentatorr Comm - 2013-03-31 10:31

      Yes, blow it that is what the reserve bank want you to do. That is what a keynesian economy is all about. If many of us beat the system by getting a head of inflation (I mean real inflation) by just storing our money or investing in stock they will be very mad and we don't know what they will do when they are really mad... confiscation of saving like Cyprus or erratic boom and bust.. Who knows?

  • roger.partridge.16 - 2012-12-29 09:20

    Who said you must put your money in the bank? My unit Trusts have been performing at at least 12% in the last 3 years. Even through the financial crisis with some of them as high as 28% for this year. There are lots of different ways to get ahead of the game. If you buy your hypothetical apple 5 years down the line for cash instead of paying 9% interest over 5 years to buy it you will save tons. Building wealth is not about money in the bank. It is about living debt free and spending money wisely and making it work for you.

  • Grannatjie - 2012-12-31 20:51

    Expanding the 'Big 5' metaphor to the 'Big 7' - The whale that sucks up your plankton is the financial company. And the shark that bites chunks out of your flesh is the financial advisor.

  • freddy.vanwijk - 2013-01-02 22:35

    Think in a relaxed mode. Where do you want to divert your fortunes, and who will benifit.

  • JOHNY63 - 2013-01-15 11:41

    Keep on giving tips guys. I hate the banks.

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