Lessons about life and in­vest­ing in your­self

Sowetan - - Your Money - Owen S Nkomo ■ Nkomo is a di­rec­tor at Inkunzi Wealth Group

How many of us, if given a sec­ond chance, would get rid of the bad habits we ac­quired over the years? Most of us would jump at the op­por­tu­nity to do things com­pletely dif­fer­ent. Yet, we don’t; we are held back by past mis­takes and do noth­ing about it. Some of us won­der if it is even worth it to cor­rect our de­ci­sions and to deal with the di­rect and in­di­rect costs as­so­ci­ated with them. Below I share with you six lessons that have opened my eyes about life and in­vest­ing.

In­vest in your­self – it is not selfish

You have a very im­por­tant fi­nan­cial as­set that many peo­ple tend to over­look: your­self. The only guar­an­teed in­vest­ment in life is you. For most of your life, you will be fo­cused on con­vert­ing your hu­man cap­i­tal into fi­nan­cial cap­i­tal. That is why most of us do not of­fer our pro­fes­sional ser­vices for free. This is the fi­nan­cial as­sets ac­cu­mu­la­tion stage of your life. You will most likely in­crease your hu­man cap­i­tal through fur­ther stud­ies, get­ting enough sleep and eat­ing well, which will hope­fully show it­self in the form of fi­nan­cial cap­i­tal through an in­crease in in­come. As time pro­gresses, a large part of your wealth will come from the fi­nan­cial as­sets you ac­cu­mu­late along the way, or your po­si­tion in the or­gan­i­sa­tional chart rather than your hu­man cap­i­tal. There­fore, it is worth­while to get the most out of your hu­man cap­i­tal ear­lier in life.

Pro­tect your hu­man cap­i­tal

Very few peo­ple – if any – will stand up and pro­claim their undy­ing love for their in­sur­ance poli­cies. How­ever, your hu­man cap­i­tal is ar­guably one of your most valu­able as­sets and you should strive to pro­tect it. Life in­sur­ance and/or dis­abil­ity cover is es­sen­tial to guard against hu­man cap­i­tal loss. In­jury or ill­ness can oc­cur at any time, which will af­fect your abil­ity to earn an in­come. If you al­ready have life in­sur­ance, you must make sure there is enough of a dis­abil­ity ben­e­fit to cover your liv­ing ex­penses in case you are dis­abled.

De­fine what is im­por­tant to you

To quote James W. Frick: “Don’t tell me where your pri­or­i­ties are. Show me where you spend your money and I’ll tell you what they are.”

It is nat­u­ral to spend money on the things you care about, whether you are aware of it or not. If you were to check your bank state­ment at the end of each month, you may find that you have spent a large sum on fine wines and cheeses, yet you will see it as noth­ing more than an oc­ca­sional in­dul­gence. Most of the time, you will find that the amount of money you want is mean­ing­fully less com­pared to what you value in life. Wealth is rel­a­tive.

Bud­get­ing is not a mag­i­cal weapon

Our re­search shows that most of your life’s ex­penses are fixed for a cer­tain pe­riod. For ex­am­ple, your bond re­pay­ments are nor­mally a 20-year com­mit­ment. We es­ti­mate that a lion’s share of your bud­get is de­ter­mined by where you stay, what type of car you drive, where you eat out or buy gro­ceries, where your chil­dren go to school and whether you pay cash or use credit. One of the most pow­er­ful and eas­i­est ways to in­crease your sav­ings is not to raise your in­come but to have a look at your life­style. It be­gins with un­der­stand­ing how much money you earn and how much you spend on things you must have and the things you want to have.

Take a few baby steps

As War­ren Buf­fet says: “Don’t save what is left af­ter spend­ing; spend what is left af­ter sav­ing.”

You do not have to in­vest large sums to be a great in­vestor. Not many peo­ple can af­ford to in­vest a large por­tion of their salary ev­ery month. The al­ter­na­tive, which is small monthly con­tri­bu­tions, is the most ef­fec­tive way to start in­vest­ing. Don’t want to spend your money? Don’t keep it in your bank ac­count. You are un­likely to can­cel a monthly in­vest­ment plan once it is set up.

Pro­tect your­self against hard­ships

When you in­vest, you are pro­tect­ing your­self against life’s in­evitable hard­ships. The fu­ture is a range of good and bad pos­si­bil­i­ties and your sav­ings can pro­vide pro­tec­tion against any punches life throws at you. What­ever you do in life, money will af­fect many of your fu­ture de­ci­sions.

Will you be able to af­ford a bet­ter ed­u­ca­tion for your chil­dren? Can you re­tire early? Can you af­ford to travel the world? Can you re­sign from your job? You will be re­minded all your adult life how you never did cer­tain things be­cause you never had enough money. Start to­day to in­vest in your fu­ture self.

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