Here is the reality. If you are living in South Africa, you will most likely be starting your financial journey from zero. Our country's history guarantees this to be the situation for most of us. One of the challenges that most of us have is that we want to act like we are not starting from zero. I know it is nice to seem "well put" to people. We all like to look good however the reality is that we are not "well put". We come from single parent households, most people around us are broke, the education system has not taught us well, nobody knows anything worthwhile about money around us, financial struggle is what we know.
You know your situation. Your situation is what most of us have lived. So how do we then achieve Financial Freedom when we are starting from Zero? In this post I will be looking at answering that question or at least give some pointers...
Okay, let me first say this. My tone might come across a bit "judgmental" and "harsh" in this post, but I mean well, I say the things I say because I really want you to succeed. These are all things I first said to myself after I had really blown it, I had so much to fix and correct in my life and finances. Being strict with myself gave me the kick I needed to take action. So I might kick you a bit too. Now with that said, let's get into it...
The first thing to Understand...
"Your Job is your way of Raising Money"
Most people hate their jobs and treat their employers like their enemies. They are always trying to get away with doing less work. Now, I am not saying that "employers" are saints and that all jobs should be appreciated, most jobs are just crap but they all can do one key thing for us... give us money to invest... invest in ourselves. Nobody is going to give you money for free to change your life. You have to raise that money yourself. Since you do not have rich parents or rich aunts and uncles, that means the closest thing to getting money to use to build yourself will come from your employer. Unfortunately, most people treat this money incorrectly... how? Read my next point...
Spending on Consumption
The most common way people stop their own financial progress is that they spend on consuming. What is consumption? Spending money on things you use up and that do not offer any financial rewards. Eg: You buy expensive clothes, you eat out at restaurants, you go to parties, you buy cellphones, you "treat" yourself.
If you did an honest check of your finances, you would discover that you spend too much money on useless things that make you feel good. You see your job as a way to get money to satisfy your "wants" and "desires". If you are starting from zero then you cannot afford this, period. You can spend on shelter, transport, food and a few keys costs to keep your life decent but you cannot be consuming and still want to achieve "financial freedom", sorry not sorry.
(Sidenote: don't forget to register for my November Online Masterclass, it is just R99)
So, what should you spend on?
Assets, you need to spend your money on assets. There is no excuse to not having an Easy Equities account and investing. By buying assets you are building your financial value. Do this and manage your credit score well and it will unlock your ability to get finance to purchase larger assets. Here is the thing, people do not get loans for property or business because they are not credit worthy and do not have assets to put down. Why? Because when they are young, they ruin their credit records with store cards and credit cards and then do not save and invest. Why? Because they see their jobs as a reward. Your job is not a reward, it is a way for you to get money to build yourself.
Why will you probably fail?
You will probably fail to achieve financial freedom because you cannot resist the urge to spend on useless things. It is that simple. Your life right now is a reflection of what you have spent your money on in the past 3 years. If you are unhappy then probably you spent your money on things that did not take you anywhere. It is tempting to throw around blame but only you have control of how you spend your money. Your money can either build you or be thrown away to what "feels good" in the moment. But let's say you want to change this, what should you do? Here are the steps...
What to do?
All the steps I will list below will require one thing from you and that is "Let Go of What other People Think of You" ... You need to live like "crap" for a few years to get your finances in check. At least two years of looking bad. So those restaurants, nice phone, great apartment to rent, expensive clothes, etc. all will have to be put on hold. The truth is that you are most likely spending your paycheck incorrectly to keep up appearances. You lie to yourself and say it is for your enjoyment (BS right there). You do it so people can think of you a certain way. If you are willing to make the sacrifice, here is what you must do...
Step 1:
Cut costs.
You need to cut costs. This may mean downgrading your lifestyle. Look at where you spend money and downgrade. So, your grocery store may have to change, your clothing store will have to change too. If you are renting a one-bedroom apartment, downgrade to a lower cost bachelor apartment. The car you drive, find a good secondhand car and downgrade, go from a 2022 Polo to a 2015 Hyundai Grand i10. Basically, keep your life decent at the lowest cost possible. You need to create a gap between your Income and Expenses. That gap is where the money to invest and build a credit record will come from.
Step 2:
Build your Credit Record.
Pay off your debts if you have any. If you do not have debts, then you need to get some good debts to build your credit record. My favorite method is to get a personal loan, then use the money from the personal loan to pay back the personal loan (add your own money for the interest). Why this method? Because it shows you can pay off money you have borrowed. Unlike a credit card paying the agreed monthly installment does not reflect badly on you, credit cards have minimum amounts that you must pay and if you pay that only it generally reflects negatively. You may need to do this multiple times, each time borrowing a larger and larger amount. Eventually the bank will make you an offer for a property loan.
Here is the lesson, your ability to secure a property loan is a process that starts years before you apply to get one. It is these years that people mess up and then cry blaming the banks for not giving them a chance. Nobody is going to give you money when you have shown you cannot be trusted with it.
Step 3:
Invest, Invest in liquid assets.
Liquid assets are just things you can sell fast. These would be shares, bonds, ETFs, Unit Trusts, REITS etc. Open an Easy Equities account and get started. It will take years to build a substantial amount of value, but the important thing is that you start and have assets to your name. Most people do not have anything valuable to their name, but it is so easy to get started. Change this in your own life and start to own things.
These assets will play a key role in the future to enable you to access credit for rental property or start a business.
Step 4:
Be patient and play the waiting game.
Building a foundation for wealth takes time. You will have to be doing all these steps every month, every year for at least 2 to 6 years before step number 5.
Step 5:
Get a second income stream.
Your investment assets would be paying you dividends or interest, but this may not be enough. You need an income stream that is totally in your control. This means starting/buying a business or buying rental property. I personally prefer rental property for most people as it is less risky than a business. If you have a career/job, then rental property is your best bet at building another solid income stream. If you have done everything in the previous steps, then the bank will be glad to give you money for this. Alternatively, you can explore the online world for different opportunities, just avoid scams or any big promises or situations where you have to give your money to a third party.
My final thoughts...
I wish I could tell you a secret investment trick that will make you rich overnight but there isn't any. It all about hard work and being able to wait. Follow the steps above and you will do well. Remember you live in a third world country, where most people come from "nothing". So, there is no reason to pretend you do not. We all start from zero, but nothing says we have to stay there... get it?
Happy Investing
- Omega
Remember: Opinions expressed in this article do not and never will constitute financial advice. Every person's financial situation is different, I recommend you speak to a financial adviser about yours.
Great advice! Wish someone told me sooner, but we live and we learn🌼
Tough advice but so much wisdom in it too😅, thank you!