Legacies of Financial Planning:
The Good & The Bad
No children, not married, no house, no car, terrible credit record; how did I get here? I am not even 30!
Many wonder how they find themselves in a financial rut during their youth and have nothing to show for the mess that has ensued.
At this point, fingers are pointed in every direction except at the young man or woman in the mirror. Possibly rightfully so?
At this point, one needs to stop and introspect; what made me:
• Take that credit card without knowing the interest rate?
• Get a mortgage at the least favourable rates?
• Buy a car that has a higher instalment than my rent? (Four pipes problem)
• Pop that extra bottle in the club?
Could it all be a matter of inherited financial habits or the lack thereof, ill-discipline, lack of financial literacy, “black tax” – family responsibility investment/spending, or just being an ignoramus?
The truth is… all these factors play a role in our financial demise.
However, like with all other aspects of our lives; our upbringing plays a major role in what kind of financial adults we become.
How then do we put an end to this vicious cycle that has plagued our generation and many before?
To break this cycle, we first need to delve into the financial habits we have inherited as well as the lack thereof.
Many of us come from a community where we saw our elders live from hand-to-mouth monthly and in this never got to learn what wealth creation and legacy are. Through this, we inherited the lack of saving, poor budgeting practices, impulse spending, bad credit habits and “what will people say” phobia.
So, enough with what the problem is; let’s be forward thinking and avoid getting caught in the trap.
Historically, wealth creation has been assumed to take three generations through formal employment unless one is a superstar, entertainer, sportsman, or inventor. Legacies require passive income and one needs to reach a point where there’s no correlation between working and creating or preserving wealth – let your money work for you.
We need to understand that the more taxing the lifestyle is that we live as youth, the higher our “wealth escape velocity” will become. Wealth escape velocity being where inflation and external events cannot negatively affect the value of your portfolio and subsequently make your finances crash to zero.
Here’s how we can become great and the generation that has wealth creation and legacy on lock:
• Have a religiously followed monthly budget
• Build a solid relationship with a Financial Planner
• Follow your dreams (DO NOT SLEEP ON YOUR CREATIVE FLAIR)
• Track your daily spend using your much-esteemed smart phone (many apps available for this)
• Shop around for the most preferential rates before committing to debt
• Do not take on non-asset financing debt, rather lay-by
• Never conclude telephonic contracts before having a read through what’s on offer
• Always read the fine print and never be scared to ask; you’re the customer after all
• Set realistic lifetime goals and start working on them
• Start saving anything you can now, compound interest is only earned if you’re indulging
To conclude, one would suggest the following spending pattern as a start:
Financial wellness is not a luxury!! It’s for everyone!!
Thabo Ntini RFP™; Professional Financial Planner and Wealth Management Expert.