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Johannesburg, South Africa

tanya@tanyahaffern.co.za

© 2017 Tanya Haffern

 

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Financial Literacy

October 17, 2017

Congratulations! You FINALLY made it! You are finally financially free! All your hard work has paid off and suddenly you find yourself with excess income.

Here's where it gets tricky. Knee jerk reaction is to celebrate, spoil yourself - go out and splash some of that hard earned money around. So you rush out and buy that fast, flashy car you have been promising yourself. You finance half of it but wow, it's sooo niiice! Looking good!

 

Time to upgrade your lifestyle! Move to that designer home in the affluent suburb you have been in love with for years. Sure you need to take a mortgage to be able to afford it but so worth it, right? That will show the nay-sayers that you were on the right track after all, won't it?

 

Now it a very good time to read "The Millionaire Next Door" by Thomas J Stanley and William D. Danko. The authors make important distinctions between the 'Balance Sheet Affluent' (those with actual wealth, or high-net-worth) and the 'Income Affluent' (those with a high income, but little actual wealth, or low net-worth).

 

High net worth individuals are more likely to devote their income to luxury goods or status items, thus neglecting savings and investments.

 

But what happens if the market suddenly changes?

 

One day you realise that living in a status neighbourhood is not only poor value, BUT you feel the need to keep buying status objects to keep up with your neighbours. An exhausting, downward spiral ensues where you'll find yourself buying things you don't need to impress people you don't like.

 

Life happens and out of the blue, you need to support your parents. Someone, perhaps even you, falls ill. Suddenly the car repayments and mortgage become crushing liabilities. Slowly it dawns on you that you are sliding backwards, straight back to dependent on a job to pay the bills.

 

But how to stop this insane cycle?

  • I encourage you to live beneath your means. Spend waaaay less than you earn.

  • Use what you have. No you don't NEED an outfit for every occasion, you can repurpose well chosen, expensive outfits. The best part?  The liberating realisation that no one REALLY will remember what you wore to last year's function - their biggest focus is what THEY look like!

  • Consider the impact our excessive spending is having on the planet. Landfills around the world are overflowing with discarded unwanted shiny new objects that quickly lost their appeal.

  • Consider spending your time and energy chasing something that fulfills you emotionally. And a top tip is that material things will never fill that void. Sure it might feel fabulous for a month or two, but everything loses its shine. You find yourself making hefty monthly payments for a car or house that no longer brings you joy.

  • Become mindful of the fact that we live in a generation chasing instant gratification. Know that the marketers are trying to make us feel inadequate without the new car/shoes/hair colour! Awareness is half the battle won!

Stay focused on your long term strategy and make sensible purchasing decisions that will ensure you remain financially free for life.

 

 

Now it's your turn to share ideas and suggestions in the notes below on how you make savvy financial decisions that keep you on track!

 

 

 

 

 

 

 

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