Latest / The Swan Effect - Creating and Sustaining Your Financial Wellbeing / S2 E13 Spend Your Way To Wealth

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S2 E13 Spend Your Way To Wealth · The Swan Effect - Creating and Sustaining Your Financial Wellbeing

• 0:00
  Arthi Rabikrisson: Your legacy is about more than just investment returns. It's about the peace of mind that comes with knowing your investments are in the right hands and that you've partnered with an investment manager who has the right skills and experience to grow your wealth. Old mutual wealth is a world class investment destination offering you a wide range of investment strategies and specialist wealth management solutions. Whether your goal is to grow your wealth, generate income or preserve capital old mutual wealth selects the best and most suitable investments based on your investment strategy and their extensive research and insight. Together with your financial planner, old mutual wealth team of experienced specialists go to great lengths to understand what really drives you. Once they know your priorities they model a strategy around your specific needs supported by a multi skilled team dedicated to taking your wealth further, whether your goal is to grow your wealth, generate income or preserve and pass on capital. oldmutual wealth is here to partner with you on this journey so that you can do more, have more, leave more and be more. Old mutual wealth is an advice led wealth management business aimed at providing financial planners and their clients with a full suite of industry leading strategies and services. For more information, please visit their website at www.oldmutual.co.za/wealth Hi, there, I'm Arthi Rabikrisson
• 1:47
  Malika Petersen: Hello, I'm Malika Peterson.
• 1:49
  Arthi Rabikrisson: Welcome to
• 1:50
  Malika Petersen: the swan effect podcast.
• 1:52
  Arthi Rabikrisson: Money makes the world go round. Yet it's not so easy to understand its complexities, particularly when it comes to investing.
• 2:01
  Malika Petersen: That's why Arthi and I are using this platform to educate, inspire and help you gain confidence in your relationship with money
• 2:10
  Arthi Rabikrisson: so that you can better manage your finances and investments.
• 2:15
  Malika Petersen: We are two women in finance.
• 2:17
  Arthi Rabikrisson: hat's pretty cool, isn't it?
• 2:19
  Malika Petersen: It certainly is. You've been in stock broking private wealth management, asset management and now an award winning business woman who is coaching and assisting businesses with capital and strategic advice
• 2:32
  Arthi Rabikrisson: and Malika you have a wealth of experience in wealth, excuse the pun, in financial planning, investments and relationship management. So you're also at the coalface when it comes to where and how people are investing, or getting it right and getting it wrong
• 2:51
  Malika Petersen: and stuck in the grey areas to indeed, I've seen the many phases and moods of financial cycle and how our decisions at those times impact us. So listeners and subscribers. If you are looking to get unstuck, feel empowered and make some strides in how you tackle your money. We are here to help you.
• 3:13
  Arthi Rabikrisson: And it all starts with listening to this upcoming episode. Enjoy.
• 3:22
  Arthi Rabikrisson: It's officially spring listeners, which means more sunshine for us in the southern hemisphere, flowers are blossoming all around us. It's really a great time to declutter and spring clean. Can you tell I have quite the spring in my step today. And are you feeling the spring effect to Malika?
• 3:41
  Malika Petersen: Absolutely feeling those spring vibes like a 1970s EP. And in the spirit of hippyness, aha, we are going to spin things for a bit Today was the topic right? So wrap your heads around this listeners.
• 3:58
  Malika Petersen: It's all about how you can create wealth by what you spend your money on, and not how much you earn.
• 4:07
  Arthi Rabikrisson: Okay, I you know, I think we need to say that again, like so, we what you're seeing is creating wealth through spending and not just earning and putting away for savings. Okay, I think that feels a little bit jarring. To be honest, because it's counterintuitive, you know if one thinks about it, but you know, I think it's so good that we bring this today because it's a perspective that often gets overshadowed in this relentless pursuit of higher incomes and therefore I can put more money away we get stuck into that kind of a hamster wheel right? And I too, I remember chasing for promotions and more senior titles, obviously coming with a bigger remuneration package, but I also remember spending a lot
• 4:53
  Malika Petersen: You got that exactly right. Yeah. And I think when we earn More, we feel financially abundant, right? So we spend on the more expensive consumption items as a splurge as opposed to managing ourselves, right. But as we'll discuss today, it's what you do with your money that can truly pave the way to financial abundance. Now I can I want ourlisteners to be very clear about this, right? The way and there are many ways that what you spend your money on can influence your wealth in the long term. And if we can land this one concept with listeners, it will lead to financial freedom in the future. So let's kick things off. Okay, let's talk start by talking about a common misconception when it comes to wealth. Many people believe that the more money you earn, the richer you will become. Now, the reality is that your spending habits and the choices that you make with your money play a significantly more important role in building wealth. Let's begin with the concept of wealth consciousness.
• 6:05
  Malika Petersen: This means being mindful of how you allocate your resources and understanding that wealth is not just an income, but also about the choices you make.
• 6:17
  Arthi Rabikrisson: You know, just listening to that. I mean, when you now and based on what you're saying Malika if if we sift, if we're shifting our focus on income, to now a focus on spending, I mean, that's a significant mindset change for many, many people. Okay, so let's then perhaps discuss some examples, just to make this a bit more real for our listeners.
• 6:39
  Arthi Rabikrisson: So this is how, you know, we can then make this shift work in practice. So for instance, instead of obsessing over earning more money, lets actually start by scrutinising our current spending habits and listeners some of the questions that you can ask yourself when you're thinking about this, first one is, are you allocating your resources wisely? So in other words, where is the bulk of your money being spent? And does it need to be spent that way? So metimewe don't pause to, to think around this, right. So for example, say you are typically purchasing a lot of clothing, and electronics on credit. Now remember, in previous episodes, we've talked about that that credit still needs to be paid. Okay? And then again, if you look, on the other hand, you only just making those like minimum payments on your fixed payments, like, for example, on your home loan, you have to think, okay, is this money being wisely spent in this way? Okay. The second one is, are you letting your money slip through the cracks? Okay, so where are those leakages of things you may be paying away unnecessarily? And examples of this would be subscriptions you've taken on your phone apps, I've actually been a victim of this myself, or premiums, that you're suddenly paying away, you've forgotten about them and actually, you're not wondering whether this is still valid. And maybe you haven't even question it before. But you know, that money's going off every month as a debit order. The third question that you could ask yourself listeners is, can I spend this money better? Okay, so with this question, it starts going into that action orientation, which is what we're all about at the swan effect podcast. We speak about it all the time. It's now about making those conscious choices such as investing in experiences that enrich your life, or in assets that appreciate over time, rather than spending recklessly on these temporary pleasures.
• 8:40
  Arthi Rabikrisson: We've spoken about this concept of delayed gratification Malika few times now, right, yeah. And I believe this is actually key when you're creating long term sustainable wealth, and Malika, you know, it's making me think of my own sort of childhood and growing up, you know, I grew up in a family where it was about making those rands stretch, right, from pruning down what we ate, you know, so even like food, you know, what we eat during the middle of the month, because that's the leanest thing, you know, to creating opportunities for tree in those became really, really memorable moments last so essential thing like going for takeout food. I mean, that was unheard of back in the day. It was such a huge thing to be able to go and get KFC suddenly on the weekend.
• 9:27
  Malika Petersen: Yeah.
• 9:27
  Arthi Rabikrisson: And for birthdays, for example, we would actually go to our local spur.
• 9:30
  Arthi Rabikrisson: And I mean, that was like, you know, my sibling, myself, my parents it, you know, it, it was something that we look forward to and you know, that mindset was you don't miss an splurge unnecessarily. But you know, if there was something that cropped up like a family event, like a wedding, there would somehow be some extra cash on hand and I'm assuming this is an emergency fund perhaps never did ask my parents actually, but there would be some extra cash in hand so we could help the family members And we will suddenly buy new Indian outfits. It is a special time. It's a special occasion. And I'm beginning to wonder, in this current situation we're in now where we're living in a very on demand type of culture where you literally can get most things you want, as often as you want, are we actually doing ourselves a disservice because it no longer becomes memorable. We don't attach as much meaning to it anymore. Maybe, maybe it's just the sentimentalist, Malika talking. But you I believe that when you spinning purposefully, it really stands out. And it means more.
• 10:35
  Malika Petersen: But yeah, I have to I have to say, this makes so much sense to me, as well as he and boy do I completely know about making, the rands and cents stretched by. I can share stories around this but the one thing that stands out on me, was from my own family experience was this over sense of investing in oneself in order to elevate out of the circumstances and have more, right. So this is what I'm suggesting is another way to create wealth is through spending to invest in yourself.
• 11:07
  Malika Petersen: And this essentially means spending on education, that next level of certification diploma or degree, that can be, you know, achieved. Alternatively, another way of investing in self is your personal development drive. You know, you you could help you could spend on assessments that help you to understand yourself better master classes or courses that help you know, you go deep in any field of interest for that matter, doesnt have to beyour career, right. And then of course, your health good health is wealth, let's be realistic.
• 11:41
  Malika Petersen: Wealth means nothing without your halth, right. And the reality of the situation is that you are able to achieve so much more wealth in with a healthy body and mind. Right, than you are when you don't have a healthy body or mind. Right. So taking up a fun project like makes you happy. My husband,will tell you spend way too much money on paper for scrapbooking, which is probably true. But it brings me so much joy, right. I mean, regular checkup on your vital stats, prioritising your nutrition, exercise, all of these things count.
• 12:19
  Arthi Rabikrisson: I truly love these reminders, because, you know, these are investments that pay off tremendously in the long run. So I mean, you know Malika I do assessments, I run master classes, I'm a credential coach, I work with some of the largest corporates in SA and I can certainly vouch for the impact, I've seen this make both on the individual level, and even with teams. And often I find all these leaders, they walk away with a greater sense of purpose as a result. And then it motivates them to make even greater impact, which then snowballs compounds, and it really just, you know, broadens your breadth of reach. So listeners, just to reiterate what Malika is saying, whether it's learning a new skill, improving your health or acquiring other types of knowledge, you know, these are investments that appreciate over time, and importantly, increase your earning potential too. So I'll share you my own example quickly, you know, all for example, doing this podcast with you, Malika, you know, you and I, we knew nothing about podcasting when we started this, but here we are, we're doing it, we've learned some skills, and we're loving the fact that it's making impact with you, our listeners and subscribers. So, you know, take a leaf out of our page as well, if you want to try and champion something new learn a new skill that could be so much greater impact and potential that comes from it.
• 13:43
  Malika Petersen: Yeah, absolutely and I cannot stress this enough, everyone. I've said it before, this work that we do on the swan effect podcast is absolutely my passion project.
• 13:55
  Malika Petersen: And definitely I've learned so many skills, which I use in other parts of my life too.
• 14:00
  Arthi Rabikrisson: Hmm, I think that's really cool. You know, Malika there is another thing we've spoken about a few time, a few times on our different episodes, and it's about how spending on assets can generate wealth. So remember, everyone, an asset is something that puts money in your pocket, rather than taking money away. So assets can include things like real estate's your stocks, even a business and instead of spending all your money on liabilities that really drain your resources, focus instead on acquiring assets that have the potential to appreciate and generate passive income and passive income in the form of dividends, potentially some additional profits on my side on the side, you know, Malika my dad was really good at something. He ran a little business it was a small convenience store, but he had all these other avenues that brought in additional income within that like square meterage of his store. Things like vending machines, gamemachines selling air time. Do you remember the good old pay telephones, he had one of those and there's so many other things. And I mean, I definitely got my sense of hustle for my dad. So, you know, I'm always scouting for opportunities to stretch my skills into other avenues. So, you know, it's, it's important we, we've got so many of these skills away where could we actually stretch them to so, you know, let's think about how we can even use some of these internal assets that we've, we've got, as well as some of the examples I've mentioned, to generate income and you know, with very little service, very little maintenance, it's that passive side of it that we're suggesting.
• 15:38
  Malika Petersen: That is such a brilliant story to share. It's kind of getting the point home, I think, for our listeners, right? So once you have an assest , beta physical one or knowledge or stock portfolio, whatever, whatever that may be, you have to know and understand how to maximise it. And that's really the thing I want to land with our listeners. I'm going to share an example Arthi and this is about a stock portfolio.
• 16:05
  Malika Petersen: Okay? So Ann Schreiber, right.
• 16:05
  Malika Petersen: She was 51 years old when she when she retired from from her job, right, as a low level auditor, as she used to work with American IRAs she had never earned a salary of more than R4000 o sorry the $4,000 per year. Now, she was an exemplary worker. She was awesome, but she had never received a promotion.
• 16:32
  Malika Petersen: Bear in mind. This is 1944 Women didn't really get promoted at that time. So essentially, this was kind of, you know, the way they work right, right. Now, the executor of her will, Benjamin Clark, right. He said that Schreiber who was investing a small savings in the stock market when she retired, right?
• 16:52
  Malika Petersen: She basically started a post retirement life with with about 12 $21,000.
• 17:00
  Arthi Rabikrisson: Okay, okay.
• 17:02
  Malika Petersen: However, many people as you know, when they retire, they're kind of like, oh, life comes to an end, I have no earning potential. This is kind of, you know, the end of it. What what I what I have in my portfolio is what I have and thats it.
• 17:16
  Arthi Rabikrisson: Yeah, yeah.
• 17:17
  Malika Petersen: Ann's story would continue for another 50 plus years. She died at the age of 101. All right, wow. At that time, her investment portfolio was worth $22 million. Im going to say that again, $22 million from $21,000 at retirment. So at retirement she had a portfolio of $21,000 she was able to grow that to $22 million in the time that she died. Right? And that she said she achieved to return to 14.6% which is not enormous, right, let's let's just not I want you I want you to this is very realistic, 14,6% per annum is a very realistic, but it shows us a couple of things.
• 18:02
  Malika Petersen: Number one, she was frugal, she knew that she needed to spend her money wisely. Number two, she was patient, she knew that it's gonna take time to build up an investment portfolio of the size. Now, please know guys, Ann and was extremely frugal and extremely patient. And it's it is an extreme example, I'm by no means suggesting. But even if we had achieved half of that, it would be significant. Even if we take slightly less frugal decisions and being slightly less patient than we would have been living an amazing life with a significant amount of wealth, right? Lastly, and I can't stress this enough compound growth was on her side, she used it to our advantage, and she absolutely understood it.
• 18:49
  Arthi Rabikrisson: Malika i mean just wow. This is the eighth wonder of the world compound, growth, everyone in action. And I do want to pick up on what you've just said about being frugal and patient and completely get it. I mean, this was an extreme case. But you know, I can just imagine if she wasn't like you said earlier, if she just sort of said, I'm retired, life's getting shorter for me, you know, and lifespans may have been shorter than that she was probably the anomaly living to 101 gone and said, I'm just going to live out the rest of my life, I'm going to splurge my $21,000 away. And that would be that this would not be the rocking story that it is right now. But you know, that sort of scenario. Let's call this the splurge lifestyle inflation, everyone. And you know, this lifestyle inflation that I'm talking about is a major roadblock to creating wealth through spending. It's when your spending increases in proportion to income. So we've mentioned this earlier, problem with lifestyle inflation is that it often leaves you with little to no savings or investments. Now remember, that's crucial, you know, you need to keep spending in check as your incomes grow, and also prioritise your savings and investments. But obviously building wealth through spending requires a long term perspective. It's not about quick fixes or get rich quick schemes. No, it's about being consistent and making those informed choices over time, everyone. And with that Malika I think we're coming to the end of our show today. Um, what would you like to add as your parting shot?
• 20:27
  Malika Petersen: Today Arthi I am reminded, you know, whenever we get to the parting shots, I always think back and I think, kind of what we discussed it and think about how if there was one thing that I wanted the listener, take out what we said, what that one thing will be, I'm reminded about our previous references to delayed gratification, and how, you know, our inability to delay gratification has a significant impact. Like you said, it's a roadblock on our journey to the achievement of sustainable and long term wealth, right?
• 21:02
  Arthi Rabikrisson: Yeah.
• 21:03
  Malika Petersen: So I think today, my parting shot is that we'll always need to remain conscious of how we spend when we have money. Emotions can get the better of us guys, let's let's let's admit, right, let's acknowledge how many times we heard about somebody, oh, I've retired, I renovated my house, I've retired, I've bought a new car, right? We we have not urge to splurge when we have money, but spending on assets that generate more money is key to achieving financial freedom. How about you Arthi, what is your parting shot?
• 21:38
  Arthi Rabikrisson: Oh, you know, for me, it comes down to a couple of things. And I think the overarching theme here is
• 21:43
  Malika Petersen: And we want to go far for sure. Thanks Arthi we you need to have a bit of a longer term view. Okay. So, you know, everyone, it's important for us to understand that financial success, your financial freedom, that doesn't happen overnight, okay. Unless, of course, you win the lottery.
• 21:58
  Malika Petersen: But the probability on that is is very slim. So things like patience, things like being disciplined, you know, this is key when it comes to actually building your wealth through spending wisely. And as we've just said, wealth isn't about how much you earn, I think I really want that to also land with listeners. It's not about you know, getting into that cycle of earning more and more, because as you've just said, we can spend more and more as well.
• 22:24
  Malika Petersen: It's about what you do with your mind cultivating that wealth conscious mindset. As you said, making conscious choices, investing yourself and your assets everyone, not about depriving yourself, let's not get this wrong, okay. But it's rather about being a bit more strategic with your choices and aligning this with your long term financial goals. Everyone wealth creation is a journey and how you spend your money can determine how far you go have had another great conversation today and listeners get yourself on the road to spending with wealth in mind this spring season?
• 23:09
  Arthi Rabikrisson: Yeah, yeah.
• 23:09
  Arthi Rabikrisson: chat again
• 23:13
  Malika Petersen: Until next time.
• 23:19
  Malika Petersen: Sharing is caring.
• 23:21
  Arthi Rabikrisson: And knowledge is power.
• 23:23
  Malika Petersen: Time for you to be daring
• 23:25
  Arthi Rabikrisson: and let your money confidence bloom like a sunflower.
• 23:30
  Malika Petersen: Thanks for joining us. We hope you found these ideas and guidance useful
• 23:35
  Arthi Rabikrisson: do subscribe, share and write a review or send us comments. We would love to hear from you.
• 23:42
  Malika Petersen: Catch you on the next episode of the Swan effect podcast.
• 23:46
  Malika Petersen: Bye for now.
• 23:47
  Arthi Rabikrisson: Ciao.