You would think a person earning R50000 a month would have all the financial security issues in place, right? Wrong.
If you spend it all, you've got nothing saved to take care of you.
My line of work makes me realise how most South Africans need real empowering financial education.
Let's take the example of Zandi. She is in her early 40s, and has an executive job earning R50000 a month.
She doesn't have a lot of debt but she is good at blowing her entire salary every month without saving.
With the realisation that her retirement is just around the corner with nothing to show for her 15 years of hard work, she is feeling insecure and very unhappy about her financial future.
She knows she is earning good money but she says it's not enough to secure her future. She intuitively knows that this kind of spending isn't sustainable but doesn't know what to do.
Zandi came seeking help on how she can remedy the problem and I did a lifestyle audit on her finances.
Here is what I found: After tax, her income is R36000. She spends R8500 on food, R15000 on rent, R1500 for electricity and water, R2500 for transport. Her cellphone bill is around R2000, she pays her helper R1650, clothing R2500 and services a loan account of R3350.
A total of all her expenses is R37000. She is overspending by R1000 every month through an overdraft facility.
Here is what I suggested she does before she is ready to meet a good financial planner.
l I proposed she buys a house. That is security for her in the long term.
l Zandi was asked to cut her "eating out" food bill from R8500 to R3000.
She will still have the money to go out occasionally. The R5000 saving covers her budget shortfall of R1000 and it gives her an additional R4000 extra to put a secure financial plan in place.
l She should cut her clothing bill and should spend R3500 per quarter instead of R7500. This means she saves R4000 over three months - which makes it approximately R1600 saving per month.
l So what does she do with the R6000 per month savings? She should start saving R1000 for an emergency fund. It is not ideal for the salary she earns but it is a start.
l She will start paying R1000 more on her bank loan of R3350. This will allow her to pay it up quicker.
Zandi's financial planner recommended that she should start having a comprehensive financial security plan.
While she is still paying off her house and starting to save for emergencies, she needs to take out four insurance covers: life cover, hospital plan, together with dreaded disease and disability cover.
She has a long way to go as she will need to find ways of saving more towards her retirement.
For now, though, she has every reason to feel good. Bear in mind that all of this has been achieved without additional money or drastic budget cuts and therefore her lifestyle has not changed a lot.
Write to Thedream@winniekunene.co.za
The well-paid also need to save
You would think a person earning R50000 a month would have all the financial security issues in place, right? Wrong.
If you spend it all, you've got nothing saved to take care of you.
My line of work makes me realise how most South Africans need real empowering financial education.
Let's take the example of Zandi. She is in her early 40s, and has an executive job earning R50000 a month.
She doesn't have a lot of debt but she is good at blowing her entire salary every month without saving.
With the realisation that her retirement is just around the corner with nothing to show for her 15 years of hard work, she is feeling insecure and very unhappy about her financial future.
She knows she is earning good money but she says it's not enough to secure her future. She intuitively knows that this kind of spending isn't sustainable but doesn't know what to do.
Zandi came seeking help on how she can remedy the problem and I did a lifestyle audit on her finances.
Here is what I found: After tax, her income is R36000. She spends R8500 on food, R15000 on rent, R1500 for electricity and water, R2500 for transport. Her cellphone bill is around R2000, she pays her helper R1650, clothing R2500 and services a loan account of R3350.
A total of all her expenses is R37000. She is overspending by R1000 every month through an overdraft facility.
Here is what I suggested she does before she is ready to meet a good financial planner.
l I proposed she buys a house. That is security for her in the long term.
l Zandi was asked to cut her "eating out" food bill from R8500 to R3000.
She will still have the money to go out occasionally. The R5000 saving covers her budget shortfall of R1000 and it gives her an additional R4000 extra to put a secure financial plan in place.
l She should cut her clothing bill and should spend R3500 per quarter instead of R7500. This means she saves R4000 over three months - which makes it approximately R1600 saving per month.
l So what does she do with the R6000 per month savings? She should start saving R1000 for an emergency fund. It is not ideal for the salary she earns but it is a start.
l She will start paying R1000 more on her bank loan of R3350. This will allow her to pay it up quicker.
Zandi's financial planner recommended that she should start having a comprehensive financial security plan.
While she is still paying off her house and starting to save for emergencies, she needs to take out four insurance covers: life cover, hospital plan, together with dreaded disease and disability cover.
She has a long way to go as she will need to find ways of saving more towards her retirement.
For now, though, she has every reason to feel good. Bear in mind that all of this has been achieved without additional money or drastic budget cuts and therefore her lifestyle has not changed a lot.
Write to Thedream@winniekunene.co.za
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