The Mail & Guardian asked two women – one an entrepreneur, the other a financial expert – to share their financial strategies
`The realisation that I had to take control of my finances came to me relatively late in life,” says entrepreneur Penelope Gracie. “I was in my late 20s when I realised that no husband was going to leave me well provided for in his will and if I am left anything by my family I will be grateful, but surprised.
“The fear of being forced to be dependent on `other people’s money’ has driven me to ensure that I am financially self- sufficient and will be able to provide for myself in my twilight years.
“I have followed these five principles:
l Secure your own home as soon as possible. Pay off your bond early and save yourself paying two-and-a-half times its original cost. Most banks are flexible enough to allow bondholders to pay in extra every month. It is the best investment you will ever make, not only financially, but for your own peace of mind.
l Borrow as little as possible. If you don’t have the cash to pay for something and be in the strong position to negotiate a cash discount, don’t have it. Wait until you can afford to pay cash for the item. Most of us have too much stuff, anyway. Ask yourself, do I really need it?
l Build up a nest egg in a separate bank or savings account – you don’t need a huge amount, but enough to feel secure that if some disaster were to happen to you, you could cope financially. The experts reckon that one should have a nest egg equivalent to about three months’ salary. Save a little every month.
l After all that, and if you have any spare cash at the end of each month, look to invest it in a balanced general unit trust. The good thing about investing in a unit trust is that while you can access the funds within 48 hours if you need to, it tends to be a bit of a palaver and so one doesn’t. Investing regularly is the ideal way to invest but there are no rules to say that you can’t invest whatever you can afford, whenever you can afford it. If you have a refund from your medical aid or some spare cash on hand, slap it into your unit trust account before it goes on dog food or another blouse you probably don’t need.
l Finally, critically assess every financial opportunity that is presented to you. If you don’t understand it and the salesperson cannot explain it to you satisfactorily, don’t give him/her your money. And always beware if the proposition offers above- average returns, it usually means that it carries above-average risk. Recognise that you may lose everything you invest, and if you are prepared to take that risk, then invest. If not, avoid it. It is far better to earn a lower return on an investment and sleep at night knowing that your funds will be there in the morning.
“You and only you are responsible for your managing your financial destiny. You can do it.”
Financial expert Patricia Tshabalala says: “Having been raised in an environment where domestic disputes were the order of the day, I yearned for the day when I would be independent. I grew up watching my mother being harassed by my father who thought nothing of having extra-marital affairs. My mother could not leave him, because, even though she was working, tradition made her financially dependent on my father, she did not have property of her own, everything was jointly owned.
“Now approaching the age of 31, I think I am on course to achieve some of the things which my mother never had, and the most important is financial independence.
“Every month, I make it a point to stash away some money into my fixed investment accounts. They earn me a decent return, and I am unable to get the money out when faced with spending urges. I have a pension plan through my employer, an international organisation, and have some money in offshore accounts to get rand hedge exposure. To further my career I am studying for a degree which has enabled me to upgrade my job.
“I have recently bought a piece of land and plan to start building my house. This, I always say, is in preparation for the future and is also a form of self-empowerment. These days people are marrying very late and more and more women are choosing to be single mothers. Whatever choice I make, I want my children to have a better life than I had. I want them to have a secure, paid-for home, which cannot be taken away. Even if I get married I will still have my own property, and will not be tied to an abusive relationship because of the fear of facing the world without anything.
“I have opportunities which my mother never had and feel I should make the best of them. And in turn I hope to have the opportunity to teach my children about independence and self-reliance.”