Look after your mind, body, soul, and your wallet, to be financially independent
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By Ali Simpkins
Being well and staying well are hot topics at the moment, and rightfully so. It is bizarre to think that we have had to put up with all that Covid-19 and lockdown have thrown at us for almost 600 days already.
It is clear from casual conversations, even sometimes with strangers, that both the pandemic and lockdown are having an impact on everyone. Defining and quantifying that impact remains to be seen, but all we can be sure about now, is that the world’s biggest psychological experiment is playing out before our very eyes.
The beauty of the human race, however is that we constantly learn and adapt, and that we often pass these learnings on to the next generation. Encountering a global pandemic will be a lesson and result in growth akin to making fire, treating indigestion, or learning how to avoid investment pitfalls – it is all part of our journey.
To contribute to this cycle of learning and development, I’ve put together a guide with some tips on how a modern-day woman can navigate her finances and avoid proven blunders on their way to financial wellness…
Start now: compound interest is your friend
I get it: being on the cusp of adulthood is complicated enough and researching how to save and invest can be overwhelming for anyone. The mathematics of investments, however, speaks for itself. Albert Einstein famously stated that “compound interest is the eighth wonder of the world. He who understands it, earns it … he who doesn’, pays it”. His use of pronouns are a sign of his time, but the concept remains just as relevant today.
The sooner you invest, the more interest you will earn, resulting in more interest being earned on that interest…you get the picture.
Don’t worry about how much you have to save – just save
Don’t let the amount of savings you have to invest be a deterrent to investing. Unit trusts, as investment vehicles, can be taken up with for as little as R250 per month, and offer a wide range of solutions to best match investors’ return and risk objectives. And, once you have a little more, you can increase this amount easily, or begin another investment entirely.
Don’t let your partner manage your money without your involvement
Ownership of your financial independence should not be underestimated or downplayed. I witnessed the reality of this lesson when my friend’s father fell ill, and her mother could not operate their household finances. She had simply not been privy to that type of information for most of their relationship.
My advice – especially to women – is to own your success and own the responsibility of managing your finances successfully. And if you are not financially savvy and are worried about how well you will be able to manage your finances, ask a financial adviser for assistance, but make sure you ask as many questions as possible, do your own research, and stay informed of what is happening with your money. The same is true if that person is someone close to you instead of a certified financial planner – you still need to ask questions and be aware of how your money is being managed.
Don’t withdraw your pension fund in cash when you change jobs
Women are moving on up and fearlessly pursuing job opportunities. You go, girl! … But, in the process, please don’t compromise on your long-term financial planning goals by not recognising all the financial implications. When changing jobs, the money you contributed to your pension fund becomes available for you to withdraw – and it’s very tempting!
But, withdrawing your retirement funds will mean you have to start from scratch all over again. Perhaps more importantly, you forfeit earning the eighth wonder of the world and there are possible tax implications. The good news is that financial service providers offer financial products such as Retirement Annuities (RA) and Preservation Funds as solutions, that allow you to preserve your money while you transfer to your new boss-babe position.
Budget and go forth
You can’t pour from an empty cup, and the same is true regarding your money. Your savings do not dramatically grow unless you commit to nurturing your proverbial piggy bank. Not allocating enough funds toward your future or for emergencies may land you in a pickle down the road.
Life happens. Pandemics happen. Take time to analyse which behaviours prevent you from saving more. Excessive spending may be your nemesis, but it can be curbed by financial budgeting and applying a disciplined approach to your spending allowance. The original girl boss, Sophia Amoruso, said in her autobiography: “Money looks better in the bank than on your feet.” Now, I’m not saying don’t buy the shoes… just buy them after you have appropriately allocated to your investments. And preferably on sale.
Ladies, look after yourselves and each other. Take time to invest in your wellness, body, mind and spirit – but don’t neglect your finances. Investing is personal. Dream big. Your time is now.
Ali Simpkins is a Chartered Financial Analyst & MCI Specialist at Momentum Investments