We tend to romanticise the idea of ‘if I won the lotto I could finally live my dream life, I could settle all my debt, give my family everything they have ever wanted, we could take those amazing international holidays, send our kids to the prestigious schools’.
We could buy the luxurious Italian cars and live in the gated communities surrounded by luscious green golf courses and shared amenities fit for royalty, after all, R50million does put you in the top 10% of all South African adults.
However, it is this thinking that gets you in trouble.
Rich people problems
R50 million in a household of 2 kids at top private schools, a beautiful home in one of SA’s sought after estates, comes with its expectations and its own set of problems and doesn’t last forever.
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We need to holiday internationally, we need to drive the latest cars, our kids insist on the latest footwear and clothing. We need to keep up with Joneses, the multimillion-rand Joneses.
These people, are no different to you and I, they too are struggling with freedom, financial freedom, peace of mind, will they have enough, is this lifestyle costing them too much, what if I lose my job how do we stop the lifestyle creep?
Sending their kids to the prestigious local schools is one thing, but what does that mean for University? UJ and WITS aren’t deemed good enough, it’ll have to be UCT or Stellies if they’re lucky, but in likelihood, they are looking at Harvard or Oxford, why?
Because they have to afford the the best of everything, they can’t be seen to be skimping now, after all, they are worth R50mill. Kids are turning 18 and they need a car, the only difference from you and I doing this for our kids is the badge on the bonnet.
These may all seem like “Rich people” problems, but to be fair they are no different to the worries we have daily, the difference is not can I put food on the table, but rather I need to make sure its Woolies and not Checkers food that’s on the table.
The stress levels of these people are high, they too lay awake at night, thinking how are we going to afford the family holiday? I don’t want to disappoint the kids, She wants the Evoque for her birthday, what am I going to sacrifice to make sure it happens?
These are real problems faced by real people every day, and it’s almost harder for them to deal with, because the expectations of keeping up appearances are huge big money = big problems.
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The key to dealing with big money problems is the same as dealing with small money problems:
1. Make a budget
Start small, get to grips with the holes in your bucket, account for inflows, but more importantly, understand the outflows, acknowledge them and take ownership and accountability for them.
A detailed budget goes a long way, you can’t be naive in thinking that because your net worth is that high, you don’t need to budget, trust me, you need to budget more than the next guy.
2. Get the family on board
As much as you need to stop the leaks, you need everyone to understand the implications of what this lifestyle is costing. What the expectation of the R5000 pair of sneakers does to the family pot of money.
Exposing your children to good money habits early on will give them the routes they need to stand tall later in life, after all, if managed correctly this money will pass to them.
3. Figure out how long it’s going to last
With the inflows and outflows you’ll be able to get an idea of how long you can sustain this standard of living, rather take your head out of the sand, know what your financial map looks like and address it, if you have all the information you can make informed decisions.
4. Understand your risk versus your return
Don’t get caught up trying to find the “Best” investment returns, (because if you have R50 million, you need to get the best investment return”) figure out how much of a return you actually need, weigh that up against the amount of risk exposure needed to get that return, and decide if you can stomach it, then find the investment that can best deliver your desired return.
And if you can’t stomach the associated risk, then drop the desired return, which means drop your lifestyle, R50 mil doesn’t entitle you to easier returns (it’s not like the market keeps all the risk free high yielding returns in a draw, for the R50 mill guys).
No matter the size of the pot, taking control of your financial life is a freeing experience, it’s empowering and keeps you in control which I guess keeps you accountable, and accountability is the first step to ensuring the longevity of your wealth.