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Now that the legal stuff is out the way, we may proceed with some words of wisdom around the issue of Money Matters. Following my rant on Twitter on the subject of #moneymatters, I was asked by the good people at S83 to shed some light on this topic – so here goes.

Many of us young professionals or graduates entering the corporate world need some financial guidance and a plan to wealth creation, but often get caught up in the cycle of debt, keeping up with appearances and basically living beyond our means. So I felt it befitting to shed some light on some of the “dos and don’ts” of how to be financially free.

So, the budget speech is around the corner and another series of Monetary Policy Committee (MPC) meetings are on the cards – what does this mean for us? Well, most go straight to the Sin tax element of the budget speech since we drink and party hence the affect on our lives and pockets, but it is important to get through the other elements to acquaint yourself with the jargon, the terms and generally how the Fiscus will be spread through the various government departments. Use it don’t use it, it’s worth getting into.

MPC? This is where it bites and eats into your pocket – the interest rate announcements made at this meeting WILL affect your life in many ways. It’s important to know what the Prime lending rate is and what your bank is willing to rate your interest on any loan application. This may sound basic, but it’s important to start with the basics so that you understand why it’s important to look at interest rates when dealing with money matters.  

The first thing you need to do is cancel all debt and avoid it at all cost!!! Some debt is necessary debt, but it’s the opportunity cost of your money that will determine how important debt can be for you as an individual. Debt can be a good thing if managed well – sadly some of us haven’t been educated about the advantages of debt – this will follow in another article, so make sure you follow this series of #moneymatters.

Here is a list of some of the Tweets that went through:

#moneymatters - car instalment does not equal maintenance! Find out from the deal how much the tyre costs! Blacks must stop with these cars

Although radical, this tweet is real. Never buy a car that is worth more than half your salary period!! Too often we walk into a dealership and buy a car without knowing the real cost of maintaining this Liability, and we land up with over exposed debt cycles that don’t end. If you’re lucky enough to have received a vehicle as a gift from your parents, drive it until you have acquired an asset. The car is a deprecating “asset” and has no real value except getting you to work, thus sometimes will fall under necessary debt – but have the foresight to make sure that you CAN afford this debt. Speak to your bank consultant about your ability to service this debt. The Black element to the Tweet is really about this whole Black Diamond saga, we need to be sustainable and educate each other on issues relating to money and finance.

#moneymatters - creating wealth is about focus, patience & tenacity. dont panic if the market folds-but don’t be emotional either. keep your wits.

Creating wealth doesn’t happen overnight, unless you’re a trust fund beneficiary, there are some lessons you need to learn before you can ever be financially free.

You need to have a plan, focus on your plan, have patience and the drive to make sure you stick to your plan. If you ever get into the investment game and you hear traders talk about how Equities will outperform other investment asset classes, you need to have the ability to understand what this means and not be an emotional investor. You need to start slow, learn and grow from there – a good place to start is with a SATRIX account (www.satrix.co.za/). Also learning to read financial indicators, get into the habit or reading the Business Day, wealth is created through knowledge.

#moneymatters -avoid pyramid schemes. there is no such thing as full proof plan! we earn our right to make more than usual. don’t be DOM!!!!

We need to exercise logic! Pyramid Schemes are a no go area. When we’re strapped for cash and are looking for an easy way out, we get emotional and start to make decisions in a cloudy environment. All I have to say is the following – Madoff ( http://en.wikipedia.org/wiki/Madoff_investment_scandal) and Tannenbaum (http://www.noseweek.co.za).

This is the first of a series of no bullshit articles aimed at starting dialogue amongst young professionals about issues relating to money.

If you have comments or questions, please email them to we@studio83.co.za

Singing out,

Yours truly,

Karabo Owame Maelane                          Photographer: Max Mogale