If your outflow exceeds your income, your upkeep becomes your
downfall ~ Jim Rohn
From a
young age I loved ‘playing shop’ with my Granny, having endless fun with my
Fisher Price cash register. I also remember the delight of getting a R2 note and
the absolute thrill of when my Dad showed me how to deposit it into the Allied
bank ATM. Finding ways to make extra pocket money was exciting; saving it
seemed like the obvious thing to do.
That was until I started my entrepreneurial journey. You don’t always have the extra pennies to squirrel away, especially when projects are thin, salaries need to be paid and your Vat is due.
I’ve made incredibly stupid financial decisions. I sometimes wonder where is that five-year-old me that was so savvy with her finances?
The biggest financial mistakes included:
- Getting a business partner on board that borrowed money from day
one;
- Having an unaffordably large staff compliment; salaries still
needed to be paid each month as well as a hefty PAYE bill regardless of
the number of projects that we had. Invariably, I ended up paying salaries
instead of my taxes, what a mess!
- Organising conferences that were unprofitable left me dearly out of
pocket.
- When I did get my head above water, instead of being sensible, I
did one of two very stupid things:
o Go on an expensive holiday or,
o Bought a new car, getting myself more and more into debt.
This is the financial advice I would give myself on 31 October 2005, the day before officially starting my own business:
- Don’t lend anyone money; you’ll never see it again. During the lock
down, I was asked by many people for loans and handouts. I reached out to
my very good friend Margaret Hirsch to find out how she managed all the
requests she gets; her very sage advice was:
o You are not a bank.
o As they say on the airplane, put the oxygen mask on yourself first. You can’t help anyone else, if you haven’t looked after yourself first.
o When you lend someone money, you are eliminating them of their self-esteem and taking their dignity away. The more you grow your self-esteem, the more you grow your bank balance, when you lend someone money, you are actually doing them a disservice.
- Credit cards: don't get lured in by their siren call, it's a trap!
o Don’t spend what you don’t have; putting things onto a credit card is not the answer!
o Get your credit card paid up as soon as possible.
- Side hustles are super, start your side hustle sooner. Having
different income streams are good.
- Have a ‘three pocket system’; when you get paid, divvy the money up
into different pockets:
- Put a % away towards saving; don’t touch this
pocket. Even if you only have R10 to put into it, 100 x ten Rands add up,
and it is marvellous to see the interest grow on your savings;
- Put a % away towards a charity or Church.
- As soon as you get paid, put 15% of it away for SARS into a different account or bank pocket so that you are not tempted to use it. Then, when you are presented with your Vat bill at the end of every two months, you won’t be panic stricken of where to try and find the funds to pay for it or worse-case scenario, having to pay it with your credit card.
- The rest you can spend.
The important part is to put something towards saving. It is actually even better to have two saving pockets; one that goes towards a rainy-day fund and the other towards something specific, e.g. a holiday (so that you don’t pay for it with your credit card). The interest that you pay on a credit card is eye watering! The interest that you receive on savings, is just so much more magical than having to cough up for it in the black hole that you get drawn into so quickly with a credit card.
- SARS isn’t going to go away, and the amount due to them will rack
up with interest and penalties. But, I have learnt that SARS does want to
help you, it benefits them if you stay in business. If you have managed to
get yourself into a pickle with outstanding debt, you can apply for a
deferment and request to pay the amount off over a period of time. The
important thing is to keep up to date with your current SARS payments
while you pay off the amount due.
- By all means, take a break but keep it local; save up for a trip
away instead of putting it onto your credit card.
- You don’t need that new car. I’ve bought beautiful, very impractical cars, which was, I’ll be the first to admit, very much ego driven! The other day when I took my car in for a service, I had a fleeting moment of thinking that it was perhaps time to trade in my car for a newer model. When I started looking at the numbers and realising just how close I was to paying off my current set of wheels, I realised, that the most beautiful car in the world, is a paid off car!
