Wolfgang Amadeus Mozart, a child prodigy who died in 1791, became one of the most successful musicians of his era. His music still lives on and will continue to be heard in years to come. Mozart like so many of us grew accustomed to a certain way of life. This desire for a certain lifestyle coupled with liberal spending habits unfortunately got him into financial trouble. It has been recorded that he would desperately plead to others including his own brother for financial support. Many of these letters still exist today.[i] We may not identify with his raw talent and unquestionable genius, but we may be able to relate to how he managed his finances.
Two hundred and thirty years later, nothing really has changed except now our access to debt has become easier and using credit cards to pay for everything is normalised. Bear in mind, not all debt is bad. Most people will not be able to buy a house and pay for it in cash, so we need a bond or a mortgage to help us. If responsibly managed, this will add value to our lives by providing a roof over our heads and a home for our family. However, if we are borrowing money to pay for stuff we don’t need, to satisfy our desire to feel good or to impress others, we run into trouble. Suddenly the value that debt can potentially create crumbles in tandem with our self-control.
Unfortunately, a large portion of South Africans don’t have the luxury of a decent income or a comfortable lifestyle. In fact, Bloomberg recently reported that South Africa has the highest official unemployment rate in the world sitting just above 34%[ii]. With shocking statistics like this, debt can be born out of necessity and just plain survival. People who find themselves in this awful situation are in desperate need for a job and any extra income to help pay off their debt. But throwing money at debt is just one piece of the puzzle that consumers need to understand. Having more money does not exempt you from returning into unnecessary debt or keeping you out for good. Like so many well-paid celebrities today, or the incredibly talented musicians of the past, managing your money well has surprisingly less to do with how smart you are or your ability to earn a good income. In his book, The Psychology of Money, Morgan Housel illustrates the point that, “earning money is one thing, keeping it is another”. [iii]
We require different skills for the pursuit of money and then the future management of it. Managing our money responsibly requires humility, self-awareness, discipline and being frugal when necessary. Our own desires coupled with the media’s influence can cloud our better judgment. We are all human after all, but unhealthy desires if left unchecked influence how much debt we can potentially get into. Our spending habits will often reflect these desires. You can tell a lot about a person by what they spend their monthly paycheck on. Not all desires are unhealthy, but I have found in my own life that desires which serve only me have a lot more unhealthier outcomes than when I am serving others. We need to check ourselves to see how well we are prioritising our needs over our wants, and the driving forces behind them.
For those of us who are lucky to have a job, having high interest debt is often a symptom of something bigger at play. Treating the symptom is not enough. It’s important to begin a journey of self-awareness to unpack the motives behind our spending habits. How we see ourselves, our emotional states including our own insecurities are going to impact our money decisions. These are the driving forces that needs to be uncovered, dusted off and brought into focus. This journey of self-awareness is not for the faint of heart and non-judgmental awareness is critical. Feelings and emotions will inevitably rise to the surface. However, this process is incredibly empowering. Once we are aware of our underlying hurts habits and hang ups, we can see how our patterns of behaviour impact our spending habits. Knowledge is power.
Probably one of the most important steps we can ever take is becoming clear on our own purpose in life and what we wish to achieve. Giving yourself permission to dream about what is possible for your life is such a powerful exercise. Having debt just stops us from doing that. Saving money brings us closer to it. It gives us financial breathing room to do what really matters for us and our families. When we are clear on our financial goals and more importantly why they matter, it inspires us to make better money decisions. Suddenly that item of clothing or accessory that everyone is talking about may not seem worthwhile. We may hold off on purchasing that new car because we know being patient will put us in a more stable position later. Self-discipline is a lot easier if our reason for it has personal significance to us.
In summary, having a plan of action and a working monthly budget to combat debt is vital but it’s not enough. We need to take it further and embark on an introspective journey of self-awareness. This process leads to self-empowerment and in turn better spending habits. Keep your own desires in check, spend less than you earn and save as much as you can. This sounds simple but it’s not easy. Humility and practicing self-discipline are a daily practice. Finally, we need to be clear on our financial goals and what we wish to achieve in this world. This may be the most powerful tool we can have in our arsenal, because when we live our lives on purpose, our behaviours and actions will fall in line with it including our spending habits.
I highly recommend speaking to a financial professional you can trust to co-create a solid strategy for your financial future. We are not meant to do life alone and our finances are no different. Having someone who is not emotionally involved can provide valuable insight and the clarity you need at just the right time. Having desires and dreams for the future is a beautiful thing. We just need to align them with our own financial positions and be wise in our pursuit. Patience and the quest for our life’s purpose will set us up for financial success. Financial freedom is more than just about having money. It’s about the freedom to go after what we truly want in this world.
[i] http://www.mozart.com/en/timeline/life/mozart-and-money/ [ii] https://www.bloomberg.com/news/articles/2021-08-24/south-african-unemployment-rate-rises-to-highest-in-the-world [iii] Morgan Housel, The Psychology of Money (Harriman House Ltd, 2020) p 59.