With every new start comes feelings of hope and new possibilities – a new year, a new city, a new job, a new relationship…we always tend to believe [or hope] that this time will yield a different and more positive outcome. With this, comes the pressure to succeed. So often, it doesn’t which can largely be attributed to our habits which make it difficult to sustain us until we reach our new goals and aspirations.
We must acknowledge that for many South Africans, poverty and financial insecurity, are not of their doing. Many people in this country live in extreme poverty and will never, no matter how much financial knowledge they have or however many budgeting spreadsheets they compile, find their way out of it unless some serious structural change occurs in our economy. For the rest, their financial situation is because of their consistent behaviour with money – their habits with money, in other words. As we begin the new year, ask yourself these 3 very important questions. Assess the many answers to these questions to help you reach a better place, financially
What are you spending your money on? Getting a good handle on your financial situation starts with the knowledge of the current picture. So often, we meet clients who have no idea how much they spend on various essentials such as food, insurance, or mobile data. In our initial discussions with clients, one of the first things we try to understand is how our clients spend their money and many discover the accurate costs during this process, which should not be the case. If you want to begin the journey towards improving your finances, you must know what the picture looks likes and how you arrived at it. One of the best ways to do this is to look at how you’ve spent your money in the previous 3 months, to establish a pattern in your behaviour. Once you’ve established a pattern, you can begin the work to change the behaviour that is not serving you and keeping you from financially security.
With every item you spend your money on, decide what is important and what isn’t and the reasons for this classification. This step is crucial as it should highlight to you what you should spending your money on first and what expenses to reduce or eliminate completely over time. The classification is easy. Putting this into practice is the actual problem as we live in a world of finite resources and unlimited wants/needs.
Why it is difficult for you to make the right financial decision, despite the knowledge you have? Our connection to money, which ultimately determines our behaviour with it, is an emotional one. For some, it is fear. Fear of not fitting in which leads to overspending. Or maybe fear of lack which leads to the hoarding of money. There is a wide spectrum of emotions that we attach to money which can be traced from how we were raised with it. Doing the work to understand how we got to this point in our relationship with money and understanding our spending triggers is difficult but important. A great place to start with this is to journal your feelings before and after you spend. How did you feel before you spent your money? Can you honestly explain why you spent your money the way you did? Is there room for you to make a different spending choice? What would that look and feel like?
How will you make the right financial decisions, going forward? According to the very brilliant book by James Clear titled, ‘Atomic Habits’, putting systems in place to help you manage your behaviour is one of the best ways to effect change. He suggests that we start with small, manageable changes that eventually lead to big changes over time. A highly recommended read if you are looking for effective ways to make positive changes in your life.
Achieving financial success is possible. Just remember to take your time with this process and understand that you will get it wrong many times along your journey. The trick is to make small changes in the right direction over time.
Provided by: Gugu Sidaki, CFP®
