Personal finance coach and author of You’re Not Broke, You’re Pre-Rich (published by Penguin Random House SA), Mapalo Makhu, shares the ‘rules’ that financially savvy women live their lives by. Say ‘hello’ to financial freedom.
Live within your means
There’s no point in funding a Champagne lifestyle on a beer budget. Financially savvy women don’t use credit to fund an elaborate lifestyle. She lives within her means while working towards her financial goals because she understands that true financial freedom is worth the sacrifice. She earns her money, invests it and only then does she live it up!
Have a budget
A budget isn’t a mental note you use to guess-timate where your money is going every month. A budget is something you’ve actually written down in an Excel spreadsheet (don’t worry, a piece of paper also works). And you need to plan 3 to 6 months in advance.
Yes, you read that right, you need to plan around 3 to 6 months in advance. Why? Because there are birthday celebrations, anniversaries and school excursions throughout the year that you need to budget for – and that’s before you take any kind of emergencies into consideration. Think about it like this: for businesses to thrive and meet their cash-flow needs, they forecast (that’s really just a fancy way of saying ‘budget’) their expenditure well ahead of time. And so should you. You might not get the numbers 100% correct but it will at least give you a good idea of what you should plan for financially.
Have a plan to tackle debt
Every cent you pay towards debt is money that you could be saving or investing. Credit card debt, overdraft debt and personal loans are majorly expensive because the interest rates charged are often high. First thing you need to do is know exactly how much debt you have, then make a solid plan of when, how and how much you’re going to pay it back – crucially – without incurring more debt in the process. And because you have a plan, you’ll know exactly when the debt will be paid off.
Be open to learning
This is something I say all the time: in order to become more confident with money, you have to educate yourself – you can’t leave your education to chance, or to your partner for that matter. It’s so empowering to approach a financial institution well equipped with knowledge, rather than depending on them to give you the right information. If you know the right questions to ask, you’ll get the right answers and solutions to your money pain-points.
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Build your wealth
According to a survey done by Game (Download Survey Infographic), the majority of women consider themselves financially savvy but only 16% are consulting with a professional when it comes to managing their finances. In my experience, this happens for two reasons. Firstly, women assume they need a lot of money in order to consult with a financial planner; this isn’t true as most financial planners don’t carry an upfront cost. Secondly, women often feel overwhelmed by all the jargon, which again shows how important it is to educate yourself on personal finance matters.
While it is, of course, important to manage your day-to-day budget, it’s just as important (if not more important) for women to invest for their future. A financially savvy woman knows that she needs to save for her short-term goals and invest for her long-term dreams and goals. A financially savvy woman knows her Net Worth (you can work that value out by adding up your assets and deducting your liabilities) and works diligently to increase it through the following:
- Sticking to a budget
- Planning to eliminate debt
- Saving for retirement even if it seems like it’s a lifetime away
- Having an emergency fund
- Setting financial success as a goal
- Having both short-term savings and long-term investments
Mapalo Makhu is the author of You’re Not Broke, You’re Pre-Rich (published by Penguin Random House SA) and is an award-winning personal finance coach and speaker, as well as the founder of Woman & Finance.