CIARAN RYAN: We are talking to Vangile Makwakwa, the founder of Wealthy Money. Hello, Vangile.
VANGILE MAKWAKWA: Hello.
CIARAN RYAN: On your website, Wealthy Money, you say that one of the aims that you have is to achieve financial freedom for your clients. Can you explain exactly what you mean by financial freedom, since this obviously has different meanings for different people?
VANGILE MAKWAKWA: Yes, definitely. When this started out I thought financial freedom meant living a debt-free life, and having an income that you can then save and start to invest. I’ve since moved on to financial freedom that is also creating passive income. It’s about teaching people how to get rid of debt, live a debt-free life, but also to save and invest, and to invest in a way that creates passive income. So moving beyond debt, by starting to create a way [in which] you are replacing your income from your employer, and even when you are no longer working and something happens in the business, that there is an income there coming in; that there’s a passive income stream.
CIARAN RYAN: So we are talking here not just about being debt-free. I’m glad you clarified that. We are talking also about generating passive income, so that if something happens to you later in your life, you have an income stream.
VANGILE MAKWAKWA: Yes, definitely. I think that’s important, because what most people don’t realise is that usually, when you lose your income stream, [that] is when most people get back to into debt because then they have to refinance the house to live, they live more on credit card debt or the overdraft. If you lose your job, say it takes about six months to replace your job, then for those six months what are you going to do?
CIARAN RYAN: Mm.
VANGILE MAKWAKWA: That takes you all the way back.
CIARAN RYAN: Obviously achieving financial freedom is a lot easier if you start saving earlier in life. Now, is it all about saving or is there more to it?
VANGILE MAKWAKWA: Well, saving is a huge part. But there is a lot more to it, right? It’s also about not just spending willy-nilly. So if you have trained yourself to spend almost all your income and just save that 10%, 90% of your income is going towards consumption. There is also investment, there is also emergency saving over and above the 10% that you are saving, in case of emergencies that I spoke about. So it’s a bit more than that.
I would even say to people what you want to do is think about what am I going to do with the savings after, say, five years? Am I going to put it into property, am I going to put some of it into property and is this money actually getting interest? So is it getting any kind of interest from investments, and is the bank the best place to get interest and to get interest and put [it] towards my savings? Would I get better savings in the stock market, would I get better savings in real estate, would I get a better return in the stock market, or would I get better returns in unit trusts, or would I get better returns in real estate?
These are the conversations that you have to start having with yourself, because it goes beyond savings to having savings and just having your money sit there, and not having any kind of interest or a decent return.
CIARAN RYAN: So you start then having a look at how to diversify these savings to achieve the best return in light of the goals that the person in front of you has.
What would you say are some of the biggest challenges that you have with clients? Is it that they see the years ticking by, they’ve got no savings or they’ve very little savings, and then how do you help them overcome that?
VANGILE MAKWAKWA: What I see as some of the biggest challenges – number one is that a lot of people, especially in South Africa, are heading up more than one household. People may be spending all their money on cars and flashy houses and things like that, but a huge part of it is that you have more than one household. People haven’t figured out how to create financial boundaries. So a huge part of my work is trying to understand why they need to look after everyone, and is there another way that they can still have other family members and extended families without putting themselves into financial dire straits. And how do you take everyone with you if they are going to come with you, and how do you let them go if they don’t want to come with you?
There are a lot of emotional factors at play. The biggest challenge I find is what to do with family dynamics in South Africa, because it plays out a lot in terms of our finances, and also self-deception of who we need to be within our families to be accepted and to be loved. That has a lot to do with money. So it’s about breaking that down.
CIARAN RYAN: I think you are talking there about what we commonly refer to as the ‘sandwich generation’, where the breadwinner is looking after not just their own children, but also the parents and probably some other family members as well.
VANGILE MAKWAKWA: Yes, like you are looking after your sister’s kids, you’re looking after your sister, you are looking after a whole bunch of people. I would never tell anyone I work with that they need to stop doing that, because those kinds of people do need help. So it’s about how we keep doing that, and is there another way to do what we do that doesn’t just add to our own ego but also empowers the other person – because there is a way to help that empowers people, and then we won’t be the ony ones who are constantly in a position of power, or are constantly helping others. But at the same time we are also feeling used and resentful, and it’s having such a huge impact on us emotionally.
So we end up getting into debt in order to keep the flows so that we can keep looking after people, but also feeling so much resentment and hatred towards the position. And a lot of financial services companies and banks don’t express that because it’s a super emotional world, because there is a lot of stuff that goes on in there. There’s a lot of whingeing and family drama and abuse and issues that need to be unearthed and healed before the true financial changes can come into play. How do you tackle that without deep psychology and therapy and all that? But they are also interconnected with finances.
CIARAN RYAN: Alright. You also talk about investing money in alignment with your values. Now, what do you mean by that?
VANGILE MAKWAKWA: What I mean by that is that you have to first understand what you planned for. I don’t just talk about investing money in alignment with your values. Values are a huge part of everything that I see. I will just talk about spending money in alignment with your values, and then investing in alignment with your values. So what I first ask people to do is to identify five of these core values and then look at the bank statements and try to see if how they are spending money is in alignment with these five core values.
Then we start to look at how you are investing money. In the same vein, how you are investing money that’s in alignment with your values. Some people really value a clean environment, right? So there are many companies that have alternative investments, for example, ‘green’ funds and the like. That is maybe your top value and you may want to look into investing in companies that are actively deciding to make money in an ethical manner, that is around fair trade, and maybe around environmentalism, and they are taking all those things into account. That’s what it means to invest in alignment with your values.
I always say to people it makes no sense for me as a vegan to say, okay, I highly value animal rights and I don’t want to contribute to animal abuse, or even the slaughtering of animals, and then go and invest in, say, a company whose core revenue is from animals, harming animals or whatever my view on harming animals is. So I’m not going to invest in that. And also it makes no sense if I say, ‘Oh, I truly value the environment’ and then go and invest in a company that I know is actively destroying the Amazon or something.
So it’s doing your research and making sure that you are getting a good return because there are companies that are very cognisant of their carbon footprint, or very cognisant of what they are doing externally to the environment, or even in terms of human rights, for instance – and investing in those that [will] ultimately ensure that you are getting a good return, looking at the company financial statements. You don’t want to just invest in a company that’s doing good, but is actually not getting a good financial return, because you want to look at what everybody calls the ‘triple bottom line’. So you want to look at the financial return, you want to look at ethical aspects of the company, you want to look at all these things. You want to have a holistic approach to investment, because your values are what guide everything.
CIARAN RYAN: Your website has this great line. It says: ‘Have an incredible relationship with money, and move beyond frugality to guilt-free spending.’ I guess this is what happens when you plan correctly and save vigorously.
VANGILE MAKWAKWA: Yes, definitely. Again, part of why I talk about spending in alignment with your values is that I always say to all my clients and students is that it makes no sense if your value is that you value how you eat – or organic food, or foods directly bought from farmers, especially in the cities, although some of those foods are more costly – and you decide, I’m going to be frugal and cut down on healthy eating, then you are going against one value, because you sometimes find that it’s cheaper to buy something that’s not organic, not chemical-free, all these things. So you find yourself in a predicament when you feel like, oh, I want to give up a value in order to save money.
But once you’ve started aligning your values or trimming your spending, you have like … core values, and you start to realise that maybe wearing expensive clothes is not as important – ‘I can cut that out, because looking good is not a core value’. So that money can now go towards organic foods, or it can go towards monthly yoga sessions. So it’s about changing the way that we see things. It’s not so much that our concept of frugality has been ‘I want to cut expenses everywhere’. Sometimes it’s about just eliminating an expense – it’s not even about cutting down on it, but completely eliminating it because it doesn’t tie to the life that you want; it doesn’t tie to a core value.
So people will say, ‘Oh, wow, I didn’t even know I could have a personal fitness coach, but I realise that there were three or four items in my budget that were not even aligned to my values, so I could completely cut them out because they were not adding to the life that I wanted. That allowed me to then get a fitness coach; that allowed me to get A, B, C, D, to start travelling.’
It’s about seeing frugality in a whole different manner. It’s not about this idea that we have of self-deprivation, of needing to give up everything that matters or everything that I used to see as ‘expensive’. That’s not what it is.
CIARAN RYAN: Just very quickly – what role does a financial advisor play in this?
VANGILE MAKWAKWA: I think a really great financial advisor – I always tell people I am not a financial advisor, but I do work with financial advisors and refer people to financial advisors – would be the person you go to and you say, look, these are my values, this is my vision for the next five years. How can we make that happen? What are some of the investments that are available? Tell me about the endowments that I can invest in through all these various investment companies, like Allan Gray, Sanlam, Old Mutual, or something in this line. So then they would go down and say this is what Coronation offers, this is what Allan Gray offers, this is what other companies offer. This is higher risk, and what your risk tolerance is. If you are this tolerant, we suggest that you go for this fund. Then they will look into the best retirement annuity option for you, and also help you figure out unit trusts. They many even help you figure out stock markets, what industries you can invest in. So it’s really important – I have a financial advisor. If you work with a financial advisor you don’t know everything that there is to know about what’s going on in the market. And a really good financial advisor will understand when the laws change. For example, when the laws change to say, well, if you have R30 000 you can invest in tax-free savings, and your financial advisor will contact you and say ‘This is what’s available and this is how you go about it, are you ready to set it up?’.
So take care of those things. Financial advisors can also help you set up a will. They can help you get life insurance. They can help you get short-term insurance, and can look for the best yields for you. We are so busy in our lives that we don’t have the time and energy to be doing all this research. I honestly don’t have the time and energy to research everything. So I really appreciate having an advisor that says these are all the things on the market – what are your thoughts on this, and my advice to you is let me know what you are thinking. This is what will help you reach your five-year vision faster. I think that’s the main thing.
CIARAN RYAN: Here’s a last one. One of the things you do when you sit down with a financial advisor is you start to confront something that you may have never confronted before, and that is your life goals. A lot of people are working and they are spending, and they are not really saving, or they are saving in a very aimless and directionless way. But when you sit down with an advisor or somebody like yourself, you get to confront your life goals which, for a lot of people, is quite an illuminating experience. How do you actually get somebody to confront their life goals and then plan for them financially?
VANGILE MAKWAKWA: Mm. Literally I ask people: ‘What do you want your life to look like in five years’ time?’ Unfortunately many people have never actually sat down and thought about that. From there we can start having a conversation. What I do is I have a worksheet for people. I then have them go home for a day or two and they fill in what they think their life in every aspect will look like. Their life in five years’ time – fitness, family relationships, romantic relationships. And then you talk about how your money can make that possible. Having a great financial and investment portfolio actually allows this life to come into pass.
CIARAN RYAN: Vangile, we are going to have to leave it there. Thank you very much.
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