This year we are doing a Wealth Management course and, by the end, you will be saving more and spending less. You might ask yourself: where do we start? We start with the end. Yes, we have to know our dreams and goals before starting on a Wealth Management program. We have to know why we are working. We have to know why we are getting up every morning and providing for our families. Yes, it is to put food on the table, pay school fees and the like, but what else? What are your dreams and desires? If you are like me, it will all be in your head and it needs to be written down. Once on paper, statistically you are more likely to achieve your goals. It is also easier to say no and stick to your budget when you know what you are saving towards.
You might say: what is the point? The Rand is trading at R15.89 to the Dollar and R22.94 to the British Pound. We have a very high current account deficit, the worst drought in thirty years, and people are calling for our president to step down. Let me remind you that we have seen worse: we have had apartheid and associated pass laws; extreme sanctions; and the Rand trading R12.45 to the Dollar in December 2001 (http://businesstech.co.za/news/general/82273/sa-rand-value-1994-2015/). We have also seen better days: a positive current account deficit when Trevor Manuel was Finance Minister; and the Rand trading at R6.20 Rand to the Dollar in early 2008. After the stock market crash in November 2008, the JSE had an amazing bull run, performing around 20% year on year for the next six years.
The state of our nation, the weakening Rand, and the looming interest rate hike as a result of high inflation, low savings and high consumer spending are all factors that we are potentially facing. Even though they may frustrate us, we cannot do much about them. In the long term they will resolve and, once again, we will see better days. In the interim, we can get rid of some non-essentials.
The advantage of a recession is that businesses that are struggling, that offer bad service or have dubious management practices will not survive in hard economic times. They will be forced to close shop or restructure and adapt to the new economic environment. Businesses that survive will operate on lower cost models, have better customer service, less profits, and may even be more environmentally friendly.
As the economy is going through a “clean-up”, we too can do a clean-up at home. We can see our household as a micro economy that can do away with some waste, operate on fewer costs and have fewer luxuries. As we do this Wealth Management program this year I hope you start cleaning up and get rid of wasteful expenditure. As you spend less, you can save more and achieve more personal goals. These goals can be short term goals, such as clearing the credit card and building up an emergency fund, to long term goals of being able to retire or going on an overseas holiday.
So let’s get the 101 of Wealth Management bedded down with written down goals, dreams and desires.