1. How crucial has financial literacy been in your life?
Absolutely crucial! It is so important to have a basic understanding of money. As a child, I remember loving to play a bank teller, and what I learnt about money back then, specifically about saving, has stood me in good stead till this day. My mother drilled into us from an early age that it matters not how much you make, you should always put a little bit away for a rainy day. I don’t like rainy days as far as money is concerned, so I do my best to prepare myself for them.
2. In what ways has financial literacy contributed to your career as an entrepreneur and coach?
As a financial planner, when I first started my business I did not really need to invest a lot of capital, and honestly at that point I did not consider all the ramifications of my decision to step out into the big, bad world. What I found when I started pursuing clients was that many simply did not have enough left over to consider investing, and I hated walking away with a sense of being incomplete. I realised that in most cases, those who had nothing left over, had very little understanding of their own money matters. Whatever they knew, whatever products they had, often it seemed as though they had not been involved in the decision-making, but rather just signed on the dotted line. I was really keen to help people understand the basics of money and, in almost all cases, basic financial literacy led to a turnaround in their finances. And more often than not, a relationship that began as a coaching one, just to get people back on track, moved into a financial planning one where they started putting away for themselves and creating a financial future for themselves. The most amazing feeling about my career as a financial planner is to witness first-hand the positive impact of financial success on my clients. I am truly their biggest cheerleader!
And because I myself am financially literate, I have been able to guard myself against moneymaking schemes, cash loans, etc. I have been able to define my own financial independence and support others in achieving what matters most to them. This has
sometimes evoked the label of “financial bully”, jokingly offered by some of my clients, to which I respond, “Hey, if that’s what it takes…”
3. Back in the day, what were the first financial services you explored when setting up a business? To what extent has that knowledge changed today and how?
The first steps I made were to invest my own capital in my business. I am a firm believer in that when
you put your own assets on the line, you will take care of them and do well, because the opposite of that would be that you would need to go and borrow money to fix your mess, and that is generally on someone else’s terms. Today, I might do things slightly differently, but to be quite honest, I am averse to debt and would rather cut my lifestyle than find myself in a potentially sticky situation.
4. Do you have any short-term insurance (i.e.: household, vehicle, personal accident, and general liability insurance)? How have you been benefiting from it?
Absolutely! These types of insurance protect my assets and allow me to focus on the important things in my life without being concerned about my goods. In the past, despite paying my premiums, I have had claims refuted because I was underinsured. It remains a bitter pill to swallow until this day, but lesson learned; now I keep my insurance up to date.
5. The savings-versus-debt debate is a common one. We all need an emergency fund, even if we still have high-interest credit card debt to pay off. How important is to have an emergency savings plan/ account today?
I think if people spent more time building emergency funds whilst paying off their debt (or before they get into debt), we’d have a lot more paid off debt! There is a positive psychological pay-off that comes from putting something away for yourself. If you consider how it feels to pay off debt on a monthly basis, there is a rather negative emotional bias to paying off debt.
Photo by Ogilvy Namibia
Some go as far as to feel no obligation to paying off debt, or applying the ostrich mentality of digging their heads in the ground rather than facing reality. The sheer glee I have seen on clients’ faces when they are making returns on their investments, have money available to go on holiday or pay for a new set of tyres on their car proves that how your money makes you feel is important. And people feel good about putting money away for themselves – so good that sometimes they can pay off their debt with what they make in savings. I believe everyone should have an emergency fund, and it is not so much about how much you must have in a separate account, and more about being in the discipline of putting away regularly and having something available when you need it most. An emergency fund is the foundation of financial freedom. When you have one, you call the shots in your financial life – not an institution or a loan shark, you call the shots!
6. Given the growing societal pressure on consumers to spend beyond their means, how do you manage to stay on top of your finances (i.e.: budgeting or consulting)?
Financial independence has always been very important to me, and I protect mine viciously. My definition of financial independence may differ from the next person’s and for me it is not necessarily about being rich in the sense of material possessions or assets. For me it is really about the experience of life that I get from being financially independent. I love the fact that I have freedom and that I have flexibility in my business and my life. All of this may come at the cost of making a whole lot more money, but money does not drive me, freedom does. I have learned a lotover the years and, once again, psychology shows that it is human nature to spend more the more you earn. It is only a sense of self discipline that keeps us from spending every cent of every dollar. I remind myself (often successfully), that of every dollar I make I must put a portion away. And when I go on those amazing holidays, or buy that new set of tyres, or fill my car when I choose to (not rushing just before the price goes up at midnight), I am clear that it makes sense not to spend it all. There are good months and bad months being self-employed, and every so often, when I go off track, I get myself back on by keeping track of my spending, which heightens my awareness, which in turn reduces my spending and eventually I am back in line.
7. Afra, do you contribute to a pension fund? If so, do you keep track of your pension fund’s growth?
Being self-employed, I am not a member of a pension fund, but I contribute to retirement annuities and am preparing for retirement with other assets as
well, including property investments. I have always contributed to a retirement annuity, even when I was in full-time employment and a member of a pension fund, because I learned early in my career (having always been in financial services) that few can take care of their old age from a financial perspective.
Considering all the other impacts of retirement, the last thing I want to worry about is not having enough to retire on.
8. What are your 2014 financial recommendations and spending tips to our readers?
I see 2014 as a year of growth. It’s an amazing time to grow your financial assets, tighten the belt and make good on some of the plans you have for your future. Take one thing that is important for you from a financial perspective and resolve to be committed to that one thing for this year. Check in on your goals regularly, reward yourself for sticking to it and keep going.
As for spending, there will always be things to spend on, there is no end to what money can buy, really, so when is it enough? That is truly up to each individual to decide and, simply put, do not spend on what you don’t need, at least not if you are struggling financially, and start putting something away.
9. What is your favourite financial quote?
“A part of all you earn is yours to keep” – Richest Man in Babylon, George S. Clason