There is a vast difference between accounting and personal finances. Contrary to the general perception, some accountants are brilliant at what they do in the workplace managing and reporting on somebody else’s money, but struggle when it comes to managing their own finances.
We do not get taught about money management at school or university, even though we are required to make money decisions daily. It is much easier to make good financial decisions in the workplace where we studied the principles around accounting, financial management, tax, budgeting, cash flow management, etc. But when it comes to our own budgeting, debt management, cash flow management, investment decisions, retirement planning and choosing appropriate risk policies, it often becomes more difficult and even daunting.
We often see accountants suddenly earning good salaries and big bonuses making poor money decisions and living a much higher lifestyle than what they can afford. They want to drive fancy cars and live the high life, often getting caught up in the debt trap from a young age. Bonuses are spent to repay debt or buy more luxury items. No provision is made for unforeseen circumstances. No solid financial foundation is set. No investment portfolio is built. With retrenchments a sad reality that can affect anybody, poor financial management can result in disaster.
Recently I was part of a panel at the University of Pretoria’s event for bursary students. One of the aspiring CA students asked a valid question: ‘We are bombarded by financial institutions and advisors wanting to sell us policies, opening bank accounts, credit cards, etc. How do we know which to choose?’ My answer was simple: ‘If the advisor goes to the trouble of understanding your circumstances, lifestyle and needs before advising on a product, go with that advisor. If the advisor wants to “sell” you a policy or product without understanding your circumstances and needs first, stay away.’
Educate yourself about finances. Understand financial markets, terminology and the different products. Get exposure to different investment products to see what works for you. Keep in mind that if your friend or colleague has achieved good results with a product, it doesn’t mean the product is right for you. Your circumstances and needs might be vastly different. The timing of the market might differ from when your friend or colleague invested or chose the product.
There is a rise in fraudulent activity and suicide attempts, many as a result of the financial strain that families and individuals are experiencing. Check in with your colleagues and staff regularly to ensure they are coping financially. Consider offering financial wellness programmes and financial coaching in the workplace to help your teams cope better with financial challenges.
Presenting financial wellness programmes on a corporate level and often working with accountants, finance departments and aspiring accountants, I realised that many accountants are struggling to manage their own finances and lack the knowledge to make good financial decisions. Never assume that all accountants have a good knowledge of personal finances. Never assume that all accountants manage their personal finances well. Never assume that accountants earning good salaries are not experiencing financial strain. Financial stress is a reality for many people. The aftermath of the lockdown period, a struggling economy, ever-increasing living costs and high interest rates are putting more pressure on people’s pockets.
Ronel Jooste CA(SA)
Director at FinanciallyFiTLife and author, speaker and radio talk show host