According to the National Credit Regulator (NCR), South Africa is headed for a debt crisis — of the 24 million credit active consumers in South Africa, 9.8 million are considered non-performing or in default. In fact, our total consumer debt is now close to R1.6 trillion!
Debt management company Debt Rescue says that more than half (51%) of indebted consumers are women, compounded by the stress of the gender wage gap, where the average male income is R165 853 compared to the average female income at R98 911, according to the Living Conditions Survey 2014/2015 (released in January 2017).
“Debt is a vicious circle which creates a feeling of helplessness,” explains Financial Advisor, Lianne Lutz of Women’s Wealth, a specialist financial consultancy which focuses on wealth coaching and financial advice for women. “Debt is often incurred because we don’t have enough money to cover expenses, only to find ourselves owing even more when we use credit to finance our expenses.”
Does this mean that we are destined to remain trapped in a permanent debt spiral of our own making, or is there a way to start creating wealth building habits?
“There is definitely a solution,” says PDM graduate Kerri Lutz, who forms part of the dynamic mother and daughter duo who lead the Women’s Wealth team. “Often, just starting to realise that there are different ways of thinking about the issue and learning new wealth building habits can be the first step in creating financial well-being and overcoming the debt loop.
Stick to these 5 wealth building habits and transform your finances for good.
1. Take control
“Budgeting is a key wealth building habit to help you create a feeling of control over your money,” advises Lianne. “It can be challenging but it is also a wealth habit which can become an automatic part of your life the more it’s practised.”
Budgeting means making a list of all your expenses. Then going through your expenses and keeping the essentials, while finding places where you can reduce spending.
“Rather than thinking of it as a chore, lighten the experience and reframe budgeting as smart spending”, says Kerri. This means that you get to make your money as effective as possible, like inviting a friend for coffee at your house rather than going out to a restaurant or making sandwiches at home, instead of buying food at work. It also means allocating funds for fun activities such as date night or movie night with your friends.”
It’s important to create a healthy balance of saving while making space to enjoy time out within your budget constraints.
“Implementing new wealth building habits when it comes to saving and spending creates a sense of control, giving you a choice of where you direct your money,” explains Lianne.
2. Think about your money story
Is your story limiting or supporting you? We all tell ourselves stories about ourselves, about the quality of our lives, about what is possible for us to do and to experience and what we can or cannot do.
What are you telling yourself about money? Is there always too much month at the end of your money or do you have enough money to meet your needs? “While telling yourself a new and different story will not magically make everything perfect, it is definitely a starting point in turning your experience of money around,” says Lianne.
Think about what you tell yourself about money. Is it easy to earn or is life a struggle? “By noticing our story, we become aware of what we are saying to ourselves so that we can decide to replace it with a different, more empowering story.”
3. The power to choose
Being in debt can be anxiety provoking, but we encourage people to think beyond the emotional response to the situation:
- Recognise your current financial situation
- Decide to get out of debt
- Create a plan: What’s the first action you can take to start clearing debt?
“Even if this doesn’t seem possible to you, start focussing on ways to start getting out of debt. Be proactive such as paying a little extra into your credit card each month. Once you’ve paid this off, start with paying extra into the next lowest amount, repeating this process until… yes, one day your debts are all paid,” says Kerri.
Know that it’s going to be uncomfortable. But most importantly, know you have a choice.
Your current comfort zone = debt, so any change or challenge to this status quo is going to be uncomfortable. And this is good!
4. Create a wealth GPS
Two factors are required in order to use a GPS: your starting and ends points. “The same applies to achieving financial health,” says Kerri. “Ask yourself, where am I financially right at this moment? Write this down — the good, bad and the ugly.”
Then ask yourself: “Where do I want to be?” Set financial goals you want to experience and achieve, then start on your financial planning to achieve this.
“Do your own research or get financial advice,” advises Lianne, “Know the type of savings needed to reach your particular goals:”
Types of savings include:
- Short term savings for close events like a holiday or wedding
- Medium term savings for events within 5 years such as a home or a car
- Long term savings such as investment in shares, retirement annuity, education policies for your children.
“Having these savings plans in place creates a sense of order and security,” explains Lianne. “Be realistic here. Start building your confidence with a small yet challenging goal which can start to change your current circumstances. Then build on it and create a bigger goal once the initial objective is achieved.”
5. Change your mind
“One of the foundations to developing financial well-being is to change the focus of your thoughts,” says Lianne, who created Women’s Wealth to assist women on a journey to achieve financial independence. “While we are not telling anyone to ignore the reality of your financial situation, you need to counteract this pervasive sense that what you have isn’t enough.” Override it and start bringing thoughts of abundance into your life: change your mind with positive thoughts of what you want to experience.
“A lot of wealth creation is a mindset. You cannot have a mindset that is poverty driven and expect to become wealthy. Changing your beliefs, your thoughts and your mindset has to happen in order to create wealth in your life. You cannot have a negative attitude towards money and expect to have a positive outcome.”
The trick is to start thinking and focussing on what you want in your life NOT on what you don’t want. The thoughts you think and the words you speak are very powerful. Use them to your benefit not to your detriment,” advises Lianne.
Read more: Feed a family of 4 on less than R100 a day
“Patience is essential,” she says. “Both with yourself and the process of developing empowering wealth building habits.”
See it as a journey and a process rather than only viewing it as an end goal. No matter how challenging and even frustrating it may be at times, you need to take it one step at a time, knowing that we are going to make some mistakes along the way — it’s inevitable and okay to do so.
“Take the first step today on your journey of implementing new wealth habits. And remember to stop along the way; just breathe. Take in your surroundings. Tell yourself you’re doing okay and you’re going to get there. Persevere until your wealth building habits are a natural part of your life, as you experience the peace of mind that comes with a debt free lifestyle,” encourages the Women’s Wealth coach.
For more information, visit womenswealth.co.za.