How to resuscitate your financial health

Picture this: It’s early on a Friday morning and you’re lying in bed. You hear that unmistakable ping,  indicating that your bank balance has gone from "nearing day zero" to joyous abundance. Oh, what a sweet, sweet feeling…payday has arrived! You breathe a sigh of relief and start fantasizing about all the beautiful ways that you will spend, spend, spend (on things that make you happy, of course).

But your happiness is short-lived. You receive another ping, only this ping starts to fill you with anxiety. Shortly afterwards, another ping and another assault on your auditory senses…rent, car expenses, doctor’s insurance, school fees, medical aid, gym memberships, that chunk of money that you dedicate to supporting family members every month...it’s time to pay up. Your lip curls as you realise that the countdown to day zero has begun once more. That sunny trip to Brazil will need to wait (or be funded by credit in a “YOLO moment”).

We get it. As a medical doctor, you work hard for your money. After nearly a decade of intense studies, long nights on call and interesting patients, there is no doubt that you earn every. single. cent. that reflects in your bank account. You work hard to fulfil a vital role in society and have pursued a calling that truly contributes to the betterment of life for so many in South Africa. However, sometimes you wonder if you should have pursued that career in finance…perhaps you would have been a brilliant actuary after all?

But despite how it may appear, earning more money is not the answer to your money problems. The Notorious B.I.G was speaking facts… "More money, more problems" is often the case. A Forbes article published in 2020[1] unpacked this phenomenon, stating that many high-income earners also have high levels of household debt. Why is this the case? Well, it comes down to a little phenomenon known as Lifestyle Creep. Essentially and often subconsciously, the more we earn, the more we tend to spend on creating a comfier lifestyle. We get tired of driving the thirdhand car from our studies…bring us the BMWs! We’ve eaten our share of instant noodles, bring us three-course meals at a premium restaurant by the sea! In a nutshell, it is human nature to want nice things and when we can afford them, we tend to buy them. However, you may be thinking "That's not me! I don’t spend my money on fancy clothes and boujee brunches. I have to support six people on my salary, one of whom is very sick” or “I am the breadwinner in my family". We get you and we understand that sometimes, we find ourselves struggling financially due to circumstances outside of our control. Life can be tough, whether you earn very little or very much. But there is always hope when it comes to reclaiming control over your finances, despite your circumstances. It's never too early or too late to build a financial plan that works for you. Here are some tips that may be helpful, depending on your unique circumstances.

1.    Make sure you’ve covered the “boring” fundamentals

We all know that there are good financial habits and bad financial habits. Often, because the good habits seem so obvious, we adopt a flippant approach to them, discarding their immense value and ability to transform our lives for the better. Habits such as creating a workable, realistic budget that makes us feel empowered rather than hopeless; setting up automatic debit orders for our savings; paying bills on time and having the necessary insurance policies can save us in the long term. If any of these activities seem daunting to you, sit with yourself and ask the all-important question: why? Chances are, you may be avoiding some important truths that are holding you back from making decisions that will move you forward, and not backward. Remember, the truth is a powerful thing. If you feel overwhelmed or defeated at the thought of tackling your financial habits, remember, there are many resources available to help you navigate your finances...*sans* the judgement. We really like the content that Nudging Financial Behaviour and Ramit Sethi create regarding healthy financial behaviours. Additionally, there are books and apps that can be of help. For simple, straightforward advice, check out Become Your Own Financial Advisor by Warren Ingram. 

2.    Pay yourself first

A popular concept in the world of financial literacy is that of paying yourself first. No, this isn’t referring to an "I deserve the shoes" attitude, but rather the habit of putting a predetermined amount of money away, in the form of savings and investments, before you spend on anything else, be it necessities or luxuries. This is in contrast to the approach that many of us typically take, where we pay our bills, attend to our wants and put the scraggly bits leftover aside in the form of a minute investment into our futures. Paying your future self first isn't easy, as we naturally tend to focus on our immediate concerns, as opposed to our future desires. But just know that with a bit of effort and practice, diligently paying yourself first will become second nature and in due time, you will reap the rewards of your focus and patience.

3.    Be honest about what you truly need to feel fulfilled

As human beings, it's often harder to be honest with ourselves than it is to be with others. This is often the case with regard to our financial habits. But to achieve the financial progress that we so desperately desire, we need to look within and determine what we truly need to feel satisfied. Having a balanced approach to how we engage with our money is critical to our overall well-being. Focusing too much on the future at the expense of the now can leave you feeling anxious, miserly and overwhelmed. On the other hand, focusing too much on the now can lead to impulsive spending behaviours and ironically, an equal amount of anxiety. You need to determine what you need in order to have sufficient resources for the future, whilst living a life that makes you happy right now. If that means contributing a modest amount of money to a monthly brunch with your best friend or donating some funds to a cause that resonates with you, then build it into your monthly financial plan. As with an exercise routine, create a plan that is authentic, realistic and somewhat challenging, as this will inspire you to stick to your goals.

4.    Consciously think about how you feel before and after a purchase

The old saying “money doesn’t buy happiness” is true, but it’s also false. Confusing? Let us explain. Some time ago, researchers investigated the relationship between how much money we have and how happy this tends to make us. What they found was incredibly insightful. As one may have suspected, living in poverty does result in lower levels of happiness. When we don't have enough money to support our families and purchase basic necessities, our emotional well-being suffers. However, once we make enough money to cover all of our basic living expenses and, can achieve a fairly comfortable living standard, our happiness levels peak. Any earnings past this point, however, do not translate to further happiness. Do you have any idea as to why this may be the case? To understand this phenomenon, we want you to think back to when you bought your most recent car. How did you feel on the day that you bought it? How did you feel when you took it for its first spin? Pretty wonderful, we imagine. How do you feel when you drive the car now? Do you still experience the same level of elation as you did before? The reality is that once the novelty of a new purchase wears off, we are often no happier than we were before the purchase. So, where does this leave you? There is definitely nothing wrong with wanting nice things! But to achieve the level of financial health that you desire, we recommend that before each purchase that you make, you really think about what is driving this purchase. Is it a spontaneous purchase, fueled by a desire to incrementally increase your waning happiness levels in the short term? Or is it a purchase that has the potential to fill a legitimate long-term need or desire? Often, an understanding of what drives our behaviours is half the battle in terms of minimising unhelpful behaviours and maximising beneficial ones.

5.    Don’t outsource your financial health – educate yourself

As with religion and voting, some things just cannot be outsourced (if you want to truly reap the benefits of these things, of course). Whilst enlisting the help of a financial mentor, such as an advisor or planner, can be life-changing, nothing is as empowering as developing your own financial literacy. Read books dedicated to the topic, speak to experts, listen to finance podcasts, read finance blogs and develop your own financial acumen. Nothing dissipates fear like applied knowledge. 

So, whilst we aren’t a registered financial provider* and cannot tell you what to do with your money, what we can say is that in the volatile times in which we live, it is very important to be financially savvy. However, we have no doubt that with a pinch of mentorship, a dash of planning and a sprig of self-control, you'll be able to ensure that your financial health stays in tip-top shape.

*We are not a Licensed Financial Service Provider. This material is not intended as and does not constitute financial advice or any other advice and is neither exhaustive nor prescriptive. It does not take into account your personal financial circumstances. Your financial adviser will assess your financial situation and needs and assist you to draw up a plan to help you achieve your financial goals.

[1] Forbes, 4 Reasons Why You Make A Lot Of Money But Have None, 2020