Old Mutual’s On The Money financial management programme, which targets mainly lower-end to middle-income earners, helped me understand that the secret to being financially independent does not lie in earning a lot of money, but rather in learning to manage the money you already have.
Report by Liziwe Ndalana
It made me realise that the money you have can double in value if it’s used wisely – this means avoiding spending money that you are still yet to receive; learning not to live on credit and committing to get rid of debt. Moving from being over-indebted to be financially independent takes a change of mind set and that is not always easy to achieve.
The course bases its money concept by simply looking at each bank note where you see that each note represents a member of the Group Five animal kingdom, and each animal possesses a character trait that we can adopt to better manage our finances.
On The Money focuses on behavioural change and mindset change of consumers in handling their money.
“Its aim is to foster a sense of financial management planning in a non-intimidating and non-paternalistic ways to people who want to improve their financial literacy,” says John Miyake, Head of Financial Education at Old Mutual. “The Big Five is the most appropriate tool to use in teaching people financial management principles, as it is most familiar to them”.
The programme is accredited and has been incorporated into many training programmes by corporates and public sector.
Entrenched in the programme are five key financial management principles such as; budgeting, getting rid of or properly managing debt, setting out clear financial goals, having a plan and being disciplined enough to stick to that plan. It is a proven fact that successful people have given time to allow their money to grow.
Investors get jittery when they see the market not performing well, what they fail to realise is that savings is a long-term commitment.
Overall, the course brought home three aspects that financial freedom takes willingness, commitment and loads of discipline. This does not mean you’ll always get it right, but having a goal to achieve helps you stay on course.
Lessons from Big Five
The Lion pays himself first. The secret of a lion is that the male lion stays behind when the female lion and cubs go out to hunt. When they get back, the male lion eats first. The principle behind this is that you need to pay yourself first by saving the first portion of your income before you pay off anything.
You need to have an emergency savings fund or a particular goal, preferably set up a debit order. You can create a savings account with the bank, a money market account or even a stokvel. You need to have some money put away in case something comes up unexpectedly.
The leopard remains focused: The Leopard is known for its powerful vision and focus; it aims at its target, whether it’s a weak or sick animal. It will not be distracted by anything else once it identifies its target.
That is planning, that’s how we should be with our savings plans and goals. When we do plan, but don’t stay focused we can easily be distracted and get off track because we are not focused enough and do not have a clear vision of why we are saving in the first place. Have a vision that’s backed up by a concrete, achievable and realistic plan.
Also get support by having one person hold you accountable. Keep your vision or goal in front of your eyes. Old Mutual has an imagination exercise where they train people to do things while their eyes are closed in order to create this vision.
The elephant never forgets; it knows what it is spending: The elephant never forgets; it has a good memory. Adopt this mentality when it comes to your budget and expenses. Know how much money you earn, who you owe and how much you have left. The only way to know this is when you write down your budget. List your creditors each by name, this will make it more tangible.
Find ways to cut back, for example it is proven that people who pack lunch at home save more than those who buy lunch at the cafeteria. “If you buy lunch at work, you could be spending about R1 000 (US$117,57) every month and multiply this by 12 is R12 000(US$1 410,82) a year”, says Miyake.
Learn to know what you earn and how much you spend by looking at your bank statement. Get into the habit of doing budget annual review exercise.
The rhino charges down debt: The rhino charges head on into the threat. This is the attitude we need to have when tackling debt, we need to charge at it head on and get rid of it. If for example, you owe five debtors, tackle first the most expensive debt. This is the debt with high interest charged such as your credit card or store card. Share your problems with the people your trust, those who will assist you. Create strategies to deal with debt and get rid of debt.
Do not replace debt with another once you have paid it off.
The buffalo finds strength in numbers: Buffaloes go in big herds and that’s where their strength lies; it’s in numbers. Savings is a long-term view; give it time to grow if you want to reap the rewards. Carefully plan your savings plan and take into consideration the power of compound interest.