Ain't nothing going on but the rent!

I am really getting fond of this talk show I have recently started following called Life with Thami on SABC 3. At first I thought it was quite the cheesy show, but after a few episodes, I think I am sold. So about 2 weeks back they were talking about financial planning as an individual as well as in marriage, and even had experts from Old Mutual South Africa to explain a few concepts. For me that was the most basic and enlightening formula on how to manage your finances as a young person starting out or as a young couple starting out and merging 2 different upbringings and money management systems to become one. I was relieved to note that even in South Africa, people generally do not like to confront their financial status honestly because they do not understand, or don’t have the skills and knowledge of how to maximise the little resources that they earn, just as is the case here in Zimbabwe. Once you mention financials, people get scared and think it’s something so complicated. What changed my whole perception of money management is when I came across the idea that the way you handle $1.00 is exactly the same way that you would handle a million dollars. I have realised that amongst many of my peers, investing in the future has become more of a luxury than a necessity. Things are so hard and one is so busy trying to live from day to day, that even saving something for a rainy day seems next to impossible. But the biggest question is how then do you plan and put money aside that you really don’t have? And why keep money aside, and not live in the moment to settle the needs of today, and just take every day as it comes? The expert from Old Mutual quickly interjected and highlighted that investing in the future is actually more important than the now. He gave a few tips that in a marriage setup, communication lines need to be very transparent with regards to income of both parties, and in the event that there is none, immediate action should be taken to ensure that there is some form of income and you build on it with time. For you to plan for money there has to be an income. Finances are the number 1 cause of breakdown in marriage. The next step is then to manage your finances by living within your means. He also agreed that things are generally more difficult than before and I would even add that in Zimbabwe, our cash economy and the crazy Zim dollar era has made most of us neglect simple financial practices because cash was always easily at hand and has even had an impact on our spending habits. Our random economy made it difficult to save because you would wake up and the banks are closed, laws have changed or something like that so many resorted to keeping money under the bed, and a few clever ones, in assets. He then went on to explain the components of a financial plan that should be everyone’s best friend. 1. Financial management – this is the day to day use of your money. How much do you earn versus how much do you spend? How are you managing your debts and what systems do you put in place to manage debt? To plan for this it is important therefore to budget your income and stick to that budget. Manage all current debt and avoid similar situations in the future. In a marriage, communicate about debts so that you can plan together on how to eliminate it. 2. Risk- this is one area that many people overlook. If you plan for risk, you save yourself more money than you would if you hadn’t made a provision for a rainy day. What plans do you have for your family’s health? In the event of a death, do you have a policy? Are your assets insured? Taking daily steps to ensure that these things are in place could put you right under the umbrella in the event of a rainy day! 3. Investment- no matter how much you earn, put a little aside to invest in something that will bring you some form of a return; money that can come in when you don’t even lift a finger. Make it a point not to spend this money, but continue re-investing. If need be, you could then use the profit of your profit to cover other components of your financial plan. 4. Estate – what plans are you making to ensure that you have an estate? Eventually one has to own an estate to be able to pass it down to their children. No matter what stage in life you are, there should be a clear plan for this and every day’s action contributes to the outcome. 5. Tax – no point in running away from taxes because when they catch up with you, it will not be pretty. Always make sure you pay your taxes and make sure you are on the right side of the law. 6. Retirement – we are not going to work forever. Plans have to be made so that when we decide to retire, we are comfortable and are not a burden on our children. I was really enlightened by these few tips and am making it a point to distribute the little that I earn to ensure that the different areas of my financial plan are taken care of. In the long run, this might actually turn out to be very profitable. Remember, $1.00 and $1 million, no difference!!