Sechaba Gqeba Welcome to the "Eight Steps to Financial Fitness"
workshops with Old Mutual.
My name is Sechaba Gqeba, and I'm your host.
So, in our previous workshop, we spoke to Elize, and our main topic was about setting
goals and achieving goals.
Now we're moving on to another aspect towards becoming financially fit, and it's thinking
like a boss.
I'm thinking of the perfect person to take us through this conversation.
Pat Magadla, who's the Senior Business Development Manager of Old Mutual Investment Group.
Pat, welcome.
Pat Magadla Thank you, Sechaba.
Sechaba Gqeba I love the title.
I love the theme, "thinking like a boss".
What exactly does that mean?
Pat Magadla I think, Sechaba, maybe we need to just take
a step back and give context, because last year was one hell of a year for many people
in the world over.
So, with the, you know, anemic macro-economic environment that were just exasperated by
the pandemic, a lot of people lost their income, a lot of people lost their businesses.
So, that's the context that we're coming from.
And I think with a new year, it's an exciting time to start planning and looking ahead.
And I was actually thinking in terms of this conversation, how can we talk in a way that
people are quite comfortable?
Sechaba Gqeba Yes.
Pat Magadla And one of my experiences when I talk to people,
to South Africans, a lot of people actually understand small business financial management
principles.
So, a lot of people understand about making a profit and making a loss.
They understand that if you want to be profitable, you need to keep an eye on your overheads.
They understand, you know, how much I need to pay for salaries, for inventory, for rental,
do I have money for advertising, do I have money to buy new equipment?
But when it comes to our own personal finances, we don't apply those same lens.
So, what I'm saying, is that I want to challenge people to say the way we understand business
concepts, let's apply those concepts when we're talking about our own personal finances,
and use those same lenses.
And for me, in my case, it's basically thinking of "Pat" as "Pat PTY Limited".
So, think of yourself as an entity and how you want to be prudent as that particular
entity.
Sechaba Gqeba So, how is personal finance and small business
management similar?
Like, how do those two sort of marry each other?
Pat Magadla Okay, so, if you look at the principles of
small business financial management, they're pretty much universal, and translate into
your own personal finances.
And I'll basically summarise it into three simple categories.
So, the one category, if you're a small business owner, one thing that you understand is that
you need to track your expenses.
You need to be very prudent about your fiscal management.
And essentially, it's understanding that how much money do we have, and how much money
is going out?
And if you translate that into your personal balance sheets, it's essentially, it starts
with the cornerstone of any personal finance: your budget.
So, understanding how much money do I actually have, and allocating that money across your
different expenses.
And one thing, Sechaba, that I've noticed when you mention the word budget to people,
people-
Sechaba Gqeba People just lose their minds!
Pat Magadla People immediately think "Okay, there she
goes"...
Sechaba Gqeba Yes.
Pat Magadla ... deprivation, austerity, I must deprive
myself."
Sechaba, it's actually the opposite.
Because what we're talking about, is that if you've got a budget, you actually understand
how much you're supposed to be spending every month.
So, if you love going out to a restaurant three times a month, budget for it, put it
in your budget.
If you like -
Sechaba Gqeba So, we're not saying don't go, or don't do
those things.
Pat Magadla We're not saying don't go, but what we're
saying is plan for it.
Put it in your plan.
Because guess what, I mean, there's a very nice quote that I came across from a guy called
Benjamin Franklin.
And he was talking about the little expenses.
And he was saying, beware of the little expenses, because those little leaks are the ones that
can sink a great ship.
So, if you're not planning for those drinks, or planning for whatever other expenses that
you like, that's what can potentially sink your ship.
So, what we're saying is that, have a budget and plan for it.
Exactly what small business owners do.
The second tip that I'd like to give away, is that you need to reduce your expenses.
So, if you look at small business owners, they understand that we need to keep an eye
on the overhead.
Sechaba Gqeba Okay.
Pat Magadla So, you need to be tracking, how much am I
spending?
How much do I still have to go before the month is over?
And I think a lot of people, this is where we fall short.
We don't keep an eye on our finances.
There's something that I came across and it said, check your finances the way you check
your social media.
Because think about it, like these days, we are so beholden to our phone, you know, if
you see someone that you follow on Twitter has just tweeted, you want to see what they
say.
Sechaba Gqeba You check what's trending.
Pat Magadla Exactly.
But we don't do the same with our finances.
So, what we're saying is that keep an eye on those finances, so that you're able to
now actually start identifying what opportunities do I have to reduce some of my expenses.
Then the third tip, and this one is critical, and very similar to small businesses: debt
management.
So, debt management, I mean, like we mentioned in our intro, a lot of people had a lot of
hardship in the previous year.
And a lot of people who actually had very healthy personal balance sheets and had savings
found themselves actually having to tap into debt, because now they've lost their jobs,
or they've lost their income.
So, we are so mindful and sensitive to that fact.
So, if you're sitting in a situation where you see that you don't like the debt that
you're sitting with.
It's okay, you need to actually accept where you are.
And you need to actually then list all of your debt, list all of your interests that
you owe on that debt, so you have a good understanding of: who do I owe?
And how much do I owe them?
Sechaba Gqeba That's really, really powerful.
And a lot of it would obviously come from owning up to your truth financially.
But let's speak about keeping track of finances.
You mentioned that a lot when you're discussing this.
What would you say to the ordinary person who like, for instance, when you mention budget
just sort of goes, okay, like buzzkill, you know?
How would you suggest that the day-to-day person keeps track of their money?
Pat Magadla So, that's a very good question.
I think we are so fortunate, you and I, and everybody else who is watching this video,
we're living in an era that's tech.
Everything is just technology driven, you know.
So, we live in an era where we can track how many steps have we done in terms of our fitness,
with fitness apps, right?
I mean, if I want food, I've got an app.
I can go on my phone, I can order food through an app.
And it's no different with your finances.
So, there are so many different financial apps out there that can help you track your
spending.
One that I'm personally familiar with, and I personally use, is 22Seven.
Sechaba Gqeba Okay.
Pat Magadla Where you actually input your own personal
budget, and you're able to actually track how much have I actually spent on a day to
day basis.
So, it makes your life easier...
Sechaba Gqeba That might be scary though, for certain people!
I'm thinking of myself, and I'm thinking...
Pat Magadla But, Sechaba, you know what's great about
it, and this is what I always say to everyone, it's essentially, you want to control your
money -
Sechaba Gqeba True.
Pat Magadla You want to tell your money where to go, you
don't want your money to control you.
So, if you are able to actually track it and see what's happening, you're able to actually
see, you know what, I still have R1000 to go when it comes to maybe going out with my
friends.
And it helps you start spending better, and more importantly, less impulse spending.
Sechaba Gqeba And debt.
How would you suggest a person get themselves out of debt?
We spoke about 2020.
We spoke about the ramifications of the pandemic and how it left many people retrenched, without
jobs, having to take pay cuts... a lot of people got them got into debt as a result
of the pandemic.
So, how would you suggest a person slowly and gradually gets themselves out of debt?
Pat Magadla So, ja, that's very important because, you
know, we always say in the financial world that there are two types of debt.
There's good debt, and there's bad debt.
Sechaba Gqeba Okay.
Pat Magadla And you need to be mindful of which debt that
you have.
And in terms of getting out of debt, there are typically two different methods that are
well written about.
The first method that I'll speak about, they call it the avalanche method.
So, after you've gone and you've listed all of your debt, and all of the interest on that
debt, with what the avalanche method says that you start with the biggest debt first,
and you basically endeavor to pay that off as quickly as you can.
But the weakness -
Sechaba Gqeba Not necessarily immediately, just -
Pat Magadla Ja, not necessarily immediately, but any extra
money that you have, to just quickly put it into that big debt, so that you can squash
that as quickly as possible.
But what research has indicated is that a lot of people struggle with the avalanche
method, because it takes you longer to pay it off.
And then a lot of people actually fall off the wagon, they just feel so discouraged.
They feel like this mountain is too high for me to climb, and they give up.
So, the second method, the snowballing method, is the one that I personally advocate for,
because of the snowballing methods that after you've listed all of your debts, you take
your smallest debt, and you pay that one off as quickly as you can.
Sechaba Gqeba Okay.
Pat Magadla And when we say that, Sechaba, we're not saying
then ignore your other debts.
Still meet your minimum contributions for your other debts, so that you meet those obligations.
And why the snowballing effect research has shown that it's more successful, because a
lot of people, guess what, you want a quick win.
So, once I pay off my first debt, I feel great.
I feel like I can do this again.
And I'm more motivated to do the next one.
And guess what's now happening, you're freeing up more cash flow as you pay off this debt,
and you're able to add more to the next debt, and you can pay it off quicker and have more
momentum.
So, the snowballing effect, for many people, yields probably better results.
Sechaba Gqeba So you say, start with the smallest, achieve
that, and then get motivated to step on to the next.
It makes a lot of sense.
But let's speak about this.
I think we stressed how much the pandemic has affected us all, in different ways.
How would you want someone to receive the conversation that you and I are having?
And what pointers would you want them to take from this workshop?
Pat Magadla So, I think for me what's key, like especially
when we talk about, you know, a lot of people have found themselves having to incur debt,
through no fault of their own.
And I think what's key is that this is a new year, it's a fresh start, and basically have
a plan.
Have a plan and then stick to it.
And I think when it comes especially to debt management, because, you know, when we mentioned
good debt and bad debt, essentially what good debt does is that it's when you borrow, to
actually buy something that's going to generate either more income for you, or create an asset.
So, for example, if you take out a loan to study, that's good debt, because you're investing
in yourself and you're able to then earn more income.
But bad debt, essentially, it's the debt that's very simplistically takes you away, further
away from your financial goals.
Bad debt is Pat taking a credit card, for example, and going on vacation.
Yes, I'm going to come back looking great, my Insta pictures are gonna look amazing.
But guess what, like a week later, I'm stressed because now I have to start repaying that.
So, that's not necessarily good debt.
So, you need to discern between good and bad debt.
But I think critically, and most importantly, Sechaba, you ask a good question.
For me, what I want the viewers to take away, is that if you find that you don't like what
your personal finances look like right now, it's okay.
It's okay.
Sechaba Gqeba I think a lot of people are feeling that right
now.
Pat Magadla Because guess what, I think every individual
on this planet has made, you know, some money mistakes along the way.
I mean, you hear stories of billionaires that have gone bankrupt.
So, whatever situation you find yourself in, it's okay.
What's important is to start that fitness again.
And remember, this is not a sprint, it's a marathon.
So, start training again.
Slowly start training, slowly start capturing those good habits, and get back on track.
And as long as every day you just keep trying, trying to do better, eventually you get to
your financial goal.
Sechaba Gqeba Pat, this has been such an eye opener.
And what's the name of the app again?
Pat Magadla 22Seven.
Sechaba Gqeba 22Seven, I'm literally downloading that when
we're done here.
I think the one thing that I took out of this specific workshop is that if you want to think
like a boss, you need to start by looking at yourself as a small business.
Debt, we look at it in different ways.
You have your bad debt, you have your good debt, but also don't feel overwhelmed.
The year 2020 derailed us and we have to start the new year off with a new attitude, looking
at it like a fitness journey, and taking things one step at a time, one day at a time.
I'll see you at our next workshop.
Transcribed by https://otter.ai