I had a single personal goal for 2017 – I wanted to become financially literate.
This seems like such a stupidly simple thing to aim for because most people believe that they are relatively financially literate. The first step to recovery is acknowledging the problem and for me the problem was that I was too scared to admit that I didn’t know enough about my own financial position. Was I broke? Did I spend too much money? Do I have enough savings? Am I saving more than I can afford? I needed to bone up on everything to do with money and money management.
I decided to read a few books and listen to a shit load of podcasts to help get me started. The first book I read was Rich Dad, Poor Dad. This is a classic and a simple way to jolt you into thinking about using your money to make more money. It’s also a great way to help you understand that the things that you like to show people are the things that are more than likely keeping you financially strapped: your car, your house, your shiney new shoes every other week.
The second book that I read was MONEY Master the Game: 7 Simple Steps to Financial Freedom by Tony Robbins. The basic premise here is to understand that your financial freedom is not dependant on a financial advisor. On the whole, most financial advisors are in it for the commission and recommend the best investment for their own back pockets, not for your financial security or prosperity.
Once I had finished these books I identified a few areas of my life that I wanted to review and change:
- My daily spending
- My monthly spending
- My savings and investments
The idea is that if you can tweak your daily and monthly expenses then you can have more to save and invest. Money makes more money if you use it properly and I decided that I should eek out more from my earnings every month to be able to invest and grow.
DAILY SPENDING HABITS
Reviewing my daily expenses was a brutal experience. If you want to be fancy and graph what you spend and track it all nicely you can definitely do that, but I literally downloaded a csv version of my transactions straight from my online banking to analyse. I then popped those into a google sheet and started highlighting expenses that I couldn’t identify or appeared a lot on a recurring basis. Anything that was over R10 ($0.80) I flagged. I then added up all the transactions from the same place and figured out what they were by going through my calendar, meetings and emails to see if they lined up to anything specific.
The most shocking discovery?
I was spending almost R2000 (±$165) a month on coffees. COFFEE WAS COSTING MY R2000 A MONTH! You think that’s a lot? It’s really only 3 coffees a day. Needless to say I immediately implemented a limit on my coffee purchasing. Now if I’m out for a meeting I have a glass of tap water, thanks.
The saving of R2000 a month immediately contributes to a new monthly investment amount.
I also noticed an unusual amount of Uber rides. My scooter has been out of commission for months. With a new battery in the scooter that cost me R1800
I was now saving R1500 on Uber rides every month.
There are a whole host of these little expenses that pop into your daily life if you don’t keep a close watch on your spending habits. Going through three months worth of transactions item by item is definitely one of the best ways to shock yourself into reality. I highly recommend doing this, even if you think you have things under wraps.
MONTHLY EXPENSES
The next task was to review all of my major monthly expenses. This is the one that I had been dreading because it involves a lot of heavy reading, thinking and analysis. You cannot be a passive passenger in your monthly expenses. You have to engage actively and really think deeply about why you spend what you spend.
Let’s begin with the car. I do not like cars. I am not a car fan or a petrol head in any way. I believe that a good car has four wheels, abs breaks, airbags and gets you from point A to point B without any hassle. That’s it. I don’t even care what colour my car is. At the start of 2017 I was driving a VW Tiguan that was costing me over R8000 including petrol, insurance and monthly installments. The Tiguan is a big car and when I looked hard at the way we use the car I realised that it’s a complete waste for my household. We hadn’t had any passengers sit in the back seats of our car in over a year. The Tiguan had to go.
It took me almost 8 months to sell that beast and eventually I found success using WeBuyCars. If you are looking to move your car quickly then WeBuyCars is a great way to go. The service was impeccable, they offered me a good price for my car and the day after contacting them my car had been settled and I was free of the R8000 a month expense!
My partner has always wanted a single cab bakkie, so that’s what we bought. Our two dogs are happy in the back and we finally have a car that suits our lifestyle. If you don’t give a shit about what other people think of the car you drive and you don’t give in to the social pressure of buying that BMW or Merc or overpriced Porsche off road monster that’ll never see mud in its life, then you can most definitely get a different car and save a lot of money every month.
At the end of this I have more than R4000 a month to add to my monthly investment figure.
Medical Aid is something that plagues me. I hate my medical aid company almost as much as everyone hates banks or mobile networks. I was on Discovery and if you know anyone on Discovery they’ll tell you how amazing the Vitality program is. Not for me. I’ve never managed to get above blue (or some such colour) so the savings aren’t that great. I’ve tried for a decade and the incentives don’t drive me. So I analysed my options, took a few months to review the various players in the space and settled on Fedhealth (thanks to Sheraan’s suggestions – check out his company, RecoMed). Our monthly payments went down from almost R6000 a month (for myself and my partner) to R2800 with basically the same benefits if you throw in gap cover.
That’s another R3200 to add to our monthly investment figure.
There are many ways to tweak your monthly expenses to ensure you are optimising your income as much as possible. The above two are the most obvious and for me made the biggest impact. The goal is not to get rid of them but to optimise them so you can free up money to invest and save.
Over the course of the year I managed to reallocate more than R10 000 a month that I was blowing on things that I didn’t want or need. That was just a single year of tweaking. Now that money goes into savings and investments and is earning me more money every month.
SAVINGS AND INVESTMENTS
I’ve never been particular big on saving and investing. I am an entrepreneur and that’s where I invest my money and my time. My businesses have always been my retirement plan. Unfortunately that’s just not a realistic or balanced way to plan or build a future. I had to begin to diversify my interests and proactively save money.
For this part of the process I recruited the help of Lifecheq. A friend of mine is one of the co-founders and I decided to support a local startup and get rid of my financial advisor completely. I don’t like the idea of someone else managing my finances without transparency or a plan. Lifecheq really helped me think about what my 5, 10 and 50 year plan was. What did I want to do when I was 40, 50 and 80 years old? I didn’t know and it was time to really think about what I would need to achieve financial freedom at those ages.
The biggest part of saving is not actually putting the money aside. The biggest part is figuring out what you want from life. For me it was really simple. I want to travel and I want to build and invest in businesses forever. To do both of these things you need significant capital.
My previous financial advisor had some of my money going into an Allan Gray Unit Trust. I dislike the Allan Gray fund I was in because it had ownership of a particular company that I believe is evil and harmful to South Africa, Net1. Allan Gray has not sold their position in Net1 and I wanted to show my disdain for this company so I have moved all of my savings and my RA over to Sygnia. I am impressed with Magda Wierzycka and her outspoken opinions about South African business and politics.
Lifecheq helped me move everything over to Sygnia and into funds that were safe and medium risk.
I am personally managing my high-risk investments in various areas like startups, stocks and newer more risky technology as it appears. Mostly it’s good to know that I am in control of the savings that I have and where the money goes every month.
2017 was definitely the year that I became financially literate. But the learning doesn’t just end because the year is up. In the game of life the skills that you acquire don’t just fall away when you set a new goal. The skills all compound and help you make more informed decisions and live a more well rounded and fulfilling life.
This year my personal goal is to become health literate. I want to understand my own health better. Here’s what I will be reading about and testing through the year:
- What and how much I eat.
- How I exercise.
- How I sleep.
- How I manage my emotions and mental state.
Four very simple, very clear areas that I want to bone up on.
I think that this particular personal goal is one of the most underrated by business owners and startup founders. We all de-prioritise our personal well being in favour of our businesses and staff. This year, I am aiming for less anxiety, more exercise, more healthy food and more fun.