This article was first published in the second quarter 2017 edition of Personal Finance magazine.
They’re at the top of their game in the financial services industry and have the net worth to match. And, like all of us, they have to manage their own finances. What habits have they nurtured to gain mastery over their money?
Andrew Darfoor, group chief executive of Alexander Forbes
Andrew is an economics graduate from the University of London, a UK qualified chartered accountant and has an MBA from Cranfield School of Management. He is married with two children.
My best money habit is automating my finances. This means sending money to investment accounts and savings accounts via automation at the start of every month. This way it is not a conscious effort on my part to think about it – it simply happens and allows me to build wealth effortlessly. To err is human, and, let’s face it, most of us would forget to put money into savings unless we automated the process. But automatic transfer is one of the easiest ways to help your money grow.
How much do I sock away? I started with between one and two percent and have progressively increased this over the years. The most important thing to me is to start the habit. Once you do, the opportunity to watch the balance grow will become an addiction.
My best money decision? There isn’t just one that I can pinpoint. For example, I didn’t invest in Apple when its shares were cheap. If I had invested all my money in Apple circa 2003, I’d have millions now. Instead of a “big home run” – to use a sporting analogy – I made a series of conservative base hits. This worked out for me.
On a more practical note, the best decision I made was to clear all my credit card balances some 10 years ago, and I now largely pay off the balances in full every month and do not buy anything with my credit cards that I cannot afford to pay off at the end of every month. My worst money decisions have been emotional decisions. It’s far better to stay calm, cool and steady when making financial decisions. My relationship with money is shaped by the belief that, after a certain point, how much do you really need? In a way, money is like a distant relative. We don’t see each other often, but it’s always nice when we do – to a point. Awareness and self-analysis can bring clarity and balance to both your psyche and your financial portfolio.
An amasser likes having large amounts of money, links money to self-worth and may feel like a failure if he or she lacks funds. An avoider puts off paying bills and does not keep financial records. Spenders, unsurprisingly, have a hard time saving money for future purchases and long-term financial goals. My relationship with money has evolved over time, and I now put myself in the amasser camp: saving to ensure financial security for my family beyond myself.
Bridget Mokwena Halala, chief executive of Assupol Life
Bridget has a Master’s degree in Business Leadership, is a member of the Institute of Directors, and she serves on the boards of Cornerstone Brokers Corporate, Assupol Holdings and the Association for Savings & Investment South Africa. Bridget is married to Desmond Halala, and they have five children: Thapelo, Lebogang, Nic, Mikateko and Matimba.
My best money habit is contractual saving. I was privileged to have been exposed to personal financial planning and advice at an early stage in my career. When I worked for the South African Police Service, staff attended financial planning sessions offered by Sanlam and Assupol, which really stimulated my thinking about compulsory saving [into an employer-sponsored retirement fund] and the importance of setting objectives to achieve short-term and long-term goals. Having a dream is one thing, making it a reality is another. It formed in me a habit of saving and the realisation that my financial destiny was my responsibility. I remember taking out endowment policies after that. In retrospect, I should have opted for a higher premium. You see the benefit of a lump sum when you want to buy a vehicle, for example.
Contractual savings is critical, particularly for young people, because when the temptation to spend strikes, you simply don’t have money to waste. I’ve also been very good at sticking to a budget and have never had a problem with debt. I remember my first account was with Truworths. After a while, I decided this wasn’t on, because they kept increasing the limit, which was an enticement to spend. Instead I got a credit card. That was 20 years ago, and I still have only one credit card. But I’m not reliant on it; the cost of credit is so high.
I ignore what’s going on around me; by that I mean I’m not interested in what other people are doing with their money. If you focus on that, you will find yourself competing with people who may have deeper pockets. I think I’ve been a good role model to my children when it comes to money. I can do a lot for them, but they know that if it’s a “nice to have”, they will ask me, “Does the budget allow for this?”. They’re sensitive to spending and understand that money doesn’t grow on trees. You have to work for it. I tell them, “You are beneficiaries of my lifestyle, but when you leave home, you will face this world.” My best money decision has been preserving my retirement savings. We I left government in 1999, it was a good move to have preserved my pension. If I had not done so, I would have regretted it. I was able to do this because of my exposure to good financial advice; I had a planner who I used to meet with once a year.
My worst money decision was liquidating my portfolio in 2003 in response to panic when the markets took a dive. I lost about R50 000. I didn’t consult my adviser at the time. But afterwards we had an interesting discussion about investing being a long-term process and the futility of trying to time the market.
On one occasion, I bought a car and was offered various options in terms of short-term insurance cover. I went with the insurer offering the cheapest premium instead of looking at the cover. The car was a BMW, and when I had an accident, my excess was 10 percent of the cost of repairs. Fortunately, I had savings to draw on, but it was a hard lesson to learn. Money doesn’t control me. I control it in the way I use it. I don’t have money stress. I don’t count the days to pay day. But I have been privileged to have been exposed to good financial advice, and I wish more people could be, as I wish that more people realised the power of contractual savings.
Khanyi Nzukuma, chief executive of Metropolitan Retail
Khanyi, who was formerly the chief executive of Momentum Consult, has a PhD in psychology and an MBA. He is married to Veliswa, and they have three children.
My best money habit is the disciplined approach I apply to managing my finances, daily, because I’m a firm believer in personal financial planning.
Personal financial planning means having a personal balance sheet and a personal income statement. Your balance sheet reflects all your assets – such as property, equity investments and cash in the bank – and any debt still owed on these assets. When you subtract the debt from the value of your assets, the result is what you’re worth. So, if your total assets are R100 000 and you owe R50 000, your net worth is R50 000. To increase your net worth, you need to acquire assets that appreciate in value over time and aim to settle debt quickly to minimise interest charges. Your personal income statement shows how you use your monthly income – in other words, it’s a budget. The purpose of a budget is to ensure you apply discipline to how you use your disposable income on a monthly basis. Research shows that people with a budget are more likely to be financially fit.
My best money decision? There are probably two. One was changing career to be a financial adviser at the age of 24. I had started my career at 22 as a career guidance teacher after qualifying as a clinical psychologist. I joined teaching, because I wasn’t allowed to practice as a clinical psychologist due to my age (considered emotionally immature at age 22). Two years into teaching I had a burning ambition to make lots of money, and I liked the idea of guiding people in their financial planning, which I considered an extension of teaching. That decision opened my eyes to the essence of financial planning early in life, as I got to fully understand the power of compound interest.
Buying my first residential property at age 25 was also a great decision. When I sold the property 10 years later, I achieved a 650-percent profit. I subsequently acquired a sizeable residential portfolio in the buy-to-let residential property market, which I still have and add to when there are good opportunities.
The biggest mistake I made was when I was 25 years old and doing exceptionally well. I bought a top-of-the-range BMW 3-series. My income was variable, and 12 months later I hit a slump in my business. For four months, I couldn’t afford to maintain the payments on the car and it was subsequently repossessed. I quickly put a rehabilitation plan in place and I have never faced a financial crisis since. I have an unemotional, practical relationship with money. My self-worth is not determined by my net worth. I also realise there is a level at which money is enough to meet our needs, and any need to acquire more is often driven by ego. For example, buying a top-of-the-range car can mean the difference between spending R1 million and R500 000. The R1-million model might give your self-esteem a great boost, but it could result in unnecessary debt, or debt you really can’t afford.
It’s possible to create an asset base for yourself no matter what you earn. Your level of earnings does not determine how wealthy you will be; being wise with your money does.
Magda Wierzycka, chief executive and founder of Sygnia Asset Management
Magda is an actuary and the former chief executive of the African Harvest Group, and formerly the director and head of institutional business at Coronation Fund Managers. Magda is married to Simon Peile, and they have two sons.
Ever since I got my first pay cheque, which was R2 500 a month, I have contributed the maximum amount I could to my retirement fund. I preserved that money every time I changed jobs. I never checked my statement or balance. I have a core belief that money is “out of sight, out of mind”, not to be touched until I am 65. This has meant that I have accumulated a very comfortable retirement pool completely outside of any other money I have made.
Working in asset management has made me conscious of the fact that management fees matter. When I worked for an active asset management company, fees determined my bonus. Hence the higher, the better. As I grew older and wiser, and accumulated some savings, I realised that fees destroy value. Today, fees matter to me just as much – I want to pay as little as I can, hence my love for passive asset management. So lesson number two is pay as little as you can for long-term savings.
My best financial decision has been to leverage, over and over again, and use that leverage to back myself. This may sound strange, as debt seems to be anathema to most well-structured financial plans.
However, the opportunity to borrow money at low interest rates and invest in something with a reasonable probability of achieving returns over and above that interest rate is too obvious to pass up. I’m not talking about running up short-term debt on my credit card in order to buy a pair of Prada shoes (which I’ve been known to do). I’m talking about taking calculated decisions to invest in businesses I was part of running, or I have founded.
Early on in my savings life, I borrowed money to buy a house and started paying it off as quickly as I could. The “mortgage bond” buffer then allowed me to withdraw the money to buy shares in a business I was running and understood very well. I have subsequently used that tactic over and over again.
My worst money decision to date? From an investment perspective, I have to admit that every time I bought property I lost
money. From the first one-bedroom apartment I bought back in the 1990s, to a large house in Camps Bay that we sold in 2016, I have been poorer for it. I now regard property the same way I regard art, as forced saving with positive utility. Hence the return you get is partly financial and partly lifestyle.
The other thing to avoid is “stagging” (buying then selling) opportunities on new listings of shares. Often the hype outweighs the reality. Your ability to take short-term bets and, after all transaction costs, get out with a profit is questionable. And, of course, there are all my handbags and shoes, which I am still trying to convince my husband are a good investment.
My relationship with money is complicated. We arrived in South Africa in 1983 with R500 in the bank, after a year in a refugee camp in Austria. I was 13 years old. My father took out loans from as many banks as would lend him money (this was before the National Credit Act) and juggled multiple credit cards just to pay the bills. I had to enrol for a university degree I did not understand, simply because it offered a full bursary. I became a vegetarian, because I could trade in my meal vouchers for cash to buy clothes. On the other extreme, once I joined the financial services industry, more by luck than design, I was suddenly
exposed to very large sums of money. This meant I could suddenly afford a lot of things. My first bonus paid for a Toyota Rav4!
This polarity has made me extremely unmaterialistic. I could lose all the possessions I have tomorrow and not care much. I have a core belief that I could pick myself up and rebuild what I have lost. Hence I enjoy being able to experience life by having money, but I roll up my sleeves to earn it.
Frank Magwegwe, managing director of Thrive Financial Wellness
Frank is a natural entrepreneur who started out selling fruit and vegetables on the streets of downtown Johannesburg. After graduating from Wits University with a BSc, he went on to earn an MSc (cum laude) in financial mathematics at the University of Pretoria. He founded Foremost Futures, the first black-owned member of the South African Futures Exchange, and is the former chief executive of Momentum’s middle-market segment. Franks holds the Certified Financial Planner accreditation. He is married to Thuli Zulu, and they have two daughters.
My money habits stem from a keen sense of knowing where my money is going. And for the past 15 years or so, I’ve practised the habit of paying myself first. I’ve set up debit orders so that all my contributions to discretionary savings are paid out of my account automatically. I don’t save after I’ve paid my expenses; I save before paying my expenses. Ten to 15 percent of my net income goes into discretionary savings instruments. I’ve opted to use unit trusts, retail savings bonds and shares.
It has been amazing to realise, just recently, the impact of disciplined, contractual savings over almost 15 years. It has really paid off. Discretionary savings, which exclude what I save towards retirement, are for emergencies and for expenses that most of us must plan for, such as replacing a car and children’s education. Because I save a percentage of my income, the more I earn, the more I save.
My best money decision was saving R50 that I was given – in dribs and drabs over a month – for helping someone. It was in 1993, when I was homeless, broke and unemployed. I used the R50 as seed capital to start my own business, selling fruit and vegetables on the corner of Plein and Wanderers streets in Johannesburg. That changed the trajectory of my life. That business enabled me to escape homelessness and to pay the registration fee to study at Wits, which was one of my proudest moments.
My worst money decision was in 1998. I was young, I had just got my degree (BSc Hons), and I gave in to peer pressure to buy a new car. I didn’t plan to buy the car, so I didn’t have a deposit. I remember leaving Investec and going down to a Honda dealership in Sandton and there was this silver Honda Civic with black leather seats, and it was beautiful. I didn’t consider insurance or what it was going to cost me to run the car. I just got it. I was recently married. About eight months later, we had to get rid of the car. It put such severe pressure on us, because all our money went to paying for that car. My wife still recalls that we ate pap and chicken livers to survive. Since then, I’ve never owned a brand-new car. All my cars have since been used cars. Fortunately, we had the wisdom to sell that Honda. We lost money on it, but at least it wasn’t repossessed.
My relationship with money is empowering. I’ve realised that money is just a vehicle. It can’t buy you respect or happiness. But it allows you to do certain things. In my case, it allows me to fulfil my purpose, which is to help people flourish. I set up a not-for-profit, Inspire Belief. The vision is social transformation through education. We give scholarships to learners and grants to teachers, and offer coaching and mentoring to teachers and learners. I donate at least six percent of my annual earnings to Inspire Belief. This enables me to share what I have to impact South Africa for the better.
When I share my story, it’s empowering, because it all started with R50. It’s not about how much money you have; it’s about what we do with it; what we can do for others. It could be mentoring, coaching, or sharing your story. Money enables me to “spend my time” as I choose. That’s is why I left Momentum. I wanted to spend time on things that are important to me. And helping others to flourish is one of those things.