Every South African can become a wealth builder and create generational wealth for their children for generations to come. Here are 3 simple rules from author Thembisa Mngadi Luthuli to kick start your journey.
Understand what influences your financial decisions
This is one of the most critical things you need to do, because even if you have good money skills, you can still make bad financial decisions.
“There is a difference between knowing which the best financial decision is and making the best financial decision,” says Thembisa, a certified financial planner, coach and author of the book Healing Financial Trauma - Gateway to Wealth. For example, we all know that it makes sense to budget and follow that budget. But not everyone sticks to their budget.
The reason is tied to our relationship with money.
“Our emotions are a big driver of the financial decisions we take,” Thembisa says. “A lot of the people I spoke to in my research on why we make poor financial decisions were young professionals earning good money. But they weren’t growing their wealth. One of the main reasons for this was their relationship with money.”
“For example, when money was scarce and people grew up in poverty, they felt poverty took away their dignity. Using money they earned later in life was a way to change these feelings. The luxury car they bought was a way of earning respect and dignity.”
If the luxury car takes too much of your income, you cannot build your wealth, which unfortunately can put you back in a poverty cycle.
Thembisa says it’s important to examine why you make these kinds of financial decisions so that you can make better decisions in future. Unless you recognise and deal with past financial traumas they will prevent you from making good money decisions and growing your wealth. The first step is to be aware of how you feel about money, and if and what you are using money to compensate for. This involves examining your past relationship with money, and how you use money today. Do this, and you will have a better idea of what you need to work on to make and stick to better financial decisions.
Talk about money all the time
The second important thing you need to do to build your wealth is to demystify money.
Money is most often a topic that is never or rarely discussed in the home. This can prevent you from developing good money skills, habits and beliefs around money.
“We never spoke about money at home. The only money message I heard was that we never had any,” Thembisa says.
“I grew up with the message that money was scarce. When I started earning money, I used it to try and compensate for those feelings of scarcity, for example by buying way more groceries than I needed. I had to look at why I was doing that and understand that I didn’t need to, and that it wasn’t growing my wealth.”
Thembisa has two sons, 10 and 12 years old, and talks to them about money all the time. “I buy them books on money, they had piggy banks when they were very young, and then bank accounts, to help them understand money and hopefully avoid some of the mistakes I made!”
Thembisa also explains to her children how businesses work, what is profit and loss, and why the family starts a new business.
She and her husband don’t say there is no money. Instead, they emphasise planning and budgeting. “If my sons want something that we have not planned for that month, and it is not an absolute emergency, we say it is not in the spending plan, which we share with them. Then we explain how we can plan for it in the future. There isn’t a message of there is no money, the message is more about managing money.”
Get expert help
Thembisa’s number one tip for managing your money well in 2023 and third rule to help you grow your wealth is to seek help.
“We are not masters of everything,” Thembisa says. “When you are sick, you go to the doctor. The same should be true if you struggle to make good money decisions. A financial coach can help you work through why you are making bad money decisions and how to change those decisions into good decisions.”
Don’t dismiss your money skills, build them!
You will need to make sure you have some money skills, which will help you manage your money well and build your wealth. You can take the free financial education course from Truth About Money to get started. Complete the course and you will be ready to take control of your finances, budget, manage your debt and start building generational wealth for your family.s