These are tough times, economically speaking, but now is also a great moment to start forming healthy money habits
– James Nash
A certain mindset is needed to start building wealth. For many people, money is merely a means to an end, allowing
them to pay their rent and put food on the table. However, it has the potential to be so much more. Wealth can be used to take on many endeavours, such as bettering your community, facilitating change, or empowering others – but first it has to be built over time. Cultivating the right mindset for this pursuit is key, and that includes being willing to make sacrifices and embrace delayed gratification.
Much of the world operates in a manner that rewards you instantly for participating: likes on photos, swiftly delivered goods, and streaming services offering a plethora of content on-demand are only a few examples. Building wealth is utterly unlike those other things. It will take time and one only reaps the rewards later in your
life, even if the sacrifices you make today are felt immediately. A long-term view is required alongside careful planning of your future, to ensure a financially stable foundation for you to build on.
One of the best investments you can make is in yourself, which you can do through education. That said, whatever your specialisation or career, it should be a priority to invest in your financial IQ and learn the basic principles of managing your own money.
This will not only improve your outcomes but also allow you to pass on this knowledge to others in your family or community, allowing you to start building generational wealth. One of the many tools you can use to do this is a financial plan, no matter how much you may earn.
Although many think only the very rich need financial planners and advice, this simply isn’t the case. Having a deeper understanding of how to meet your needs, achieve your goals, and make provision for the unexpected will give you confidence when making financial decisions and peace of mind about the future. A financial plan allows you to be in control of your money, instead of allowing it to control you.
Learning to align your finances with your priorities will make an impactful difference in your life. Don’t waste time and resources on things that aren’t important to you.
Think about the future you want for yourself and your family and invest in what makes that possible. In fact, many of the wealthiest people in the world got where they have because they spent their time, resources, and capital on solutions to real-world problems.
However, one can only invest if they can afford it, so to start making those fi steps, it’s important to build healthy money habits. As the saying goes, the devil is in the details – it’s often the small, seemingly insignificant habits and disciplines that make a fundamental difference in the long run. One of the most important of these habits is simple but often overlooked: saving. Putting aside money every month may seem daunting, especially to those only beginning their careers, but starting as early as possible, no matter how small, will give you a considerable head start.
Although it sounds like a restrictive activity, budgeting is relatively easy and will free up money in the long run. An excellent habit to develop, it will give you a clear view of how much money you have coming in and where it goes each month. Incorporating savings as a regular monthly expense will help you remain disciplined and when it’s all calculated, what remains is yours to enjoy. Even if you’re not comfortable with spreadsheets, there are many apps you can use and even bank accounts designed to help you budget. Budgeting will also help you to be prepared for when things don’t go according to plan.
A family member may fall ill, a car might need to be fixed, or something else that requires an immediate solution might occur. An emergency savings fund specifically for times like these is an important thing to create. It can mean you can avoid debt in the long run, something that is key for building wealth. A credit card is also a useful tool, allowing you to build a credit record that will allow you to take a loan for a car or house down the line. However, it’s important to not view it as a source of “free money”. If you aren’t careful, it’s easy to get into debt and your money will be wasted making interest payments.
All of the above tips will help but the most important advice is to start saving early. Retirement may seem a long way away but time is your biggest ally in terms of building wealth. A little bit of money put away each month can become something much larger if you’re consistent about it. Partnering with a financial planner can help you to start your financial journey and cultivate habits that will change your life. A financial planner can help you to avoid common pitfalls, especially if you aren’t confident in your knowledge yet. A small investment in the larger picture, it’s a way of making wealth a personal priority.
Compiled by John Karis:
Nedbank Head of Sales and Services – Nedbank Financial Planning.