What do four of South Africa’s most accomplished female actuaries have in common apart from being ace number crunchers? They are all financially independent and empowered, but not because they are actuaries or earn good salaries. All of them learnt at an early age that it takes hard work, dedication and self-discipline to make money work in your favour.
Since August is all about empowering women, these four actuaries agreed to share their top tips on how to empower yourself financially as a woman.
Invest in yourself and avoid the debt trap
Professor Roseanne da Silva, President-elect of the Actuarial Society of South Africa and adjunct professor in the School of Statistics and Actuarial Science at Wits University, says investing in an education and resisting debt are the two decisions that have placed her on a path of financial independence.
“I think I would have to say that my best financial decision was to study actuarial science. My education has given me the opportunity to build a rewarding career and to enjoy financial independence.”
She says this highlights the importance of investing in education. “Whether it is obtaining a professional qualification, or acquiring additional skills in IT or bookkeeping, the potential for a great return on investment is huge.” She therefore urges all women to consider acquiring additional skills by exploring learning opportunities offered by their employer or by taking courses outside of work.
From a young age Da Silva was cautioned about falling into the debt trap by her parents who gave her the same advice that Polonius gave his son Laertes in Shakespeare’s Hamlet before he goes back to school: “Neither a borrower nor a lender be.”
She says the only time she incurred debt is to fund her home and car. “In both cases I followed the principle of borrowing a maximum of 80% of the debt that my income would allow me to take on. This meant that I did not run into trouble when interest rates increased and it also meant that I kept some of my funds for savings.”
According to Da Silva remorse sadly comes too late for many people; usually when they are nearing retirement. “Many people contemplating retirement suddenly realise that instead of buying an expensive car or home when they were still earning a salary, they should have saved money for their retirement,” she says.
She points out that more expensive homes and cars are also more expensive to maintain and usually come with higher insurance premiums and rates and taxes.
Her advice is therefore not to borrow to the maximum and to never go into debt for things like furniture and funding holidays. “Rather defer the purchase of these things until you have saved enough money to buy them cash. That way they will then cost you far less in the longer term.”
Start investing early and be consistent
Kirshni Totaram, Global Head of Institutional Business at Coronation Fund Managers, got her wake-up call when she joined the specialist investment management firm.
“It became clearly evident how little prepared and informed I had been prior in making some of the most basic but essential decisions when it came to personal savings,” admits Totaram.
She agrees that it is not easy to think about retiring when you’re freshly qualified and just starting your career. “The idea of getting old is one that we are simply not prepared to entertain – not even for a second. But the reality is that it will happen.”
Totaram says the biggest and most important lessons for her were that the earlier you start investing the better, and no matter what the circumstances be consistent even if you just invest a couple of hundred rands a month.
She refers to a statement by Albert Allen Bartlett, a renowned thinker and academic, that “the greatest shortcoming of the human race is our inability to understand the exponential function”. In the world of investing, the exponential function refers to compound interest.
“Choose a fund manager with a consistent performance track record and let the power of compounding work for you, advises Totaram.
Totaram says you also need to be able to resist the urge to cash in your investments when markets experience a correction. “Furthermore, don’t be tempted to churn your investments in pursuit of the latest and greatest fad that just did well. Choose a suitable fund and stick to it.
And lastly, don’t be tempted to dip into your retirement savings along the way.
Learn to budget
Shivani Ramjee, senior lecturer and Strategic Projects Manager in the Office of the Dean at the University of Cape Town, says her ability to work within a budget has helped her take a disciplined and committed approach to savings, which is the surest way to ensure financial freedom.
She remembers how, fresh out of university, her father forced her to draw up a budget.
“He convinced me to commit to save the difference between my salary and budgeted expenses before I even received my first pay check. The money was deducted off my account every month via debit order and an important lesson was learnt: money that you don’t see is money that you can’t spend.”
Ramjee says a sure way to fail in your savings efforts is to wait and see how much money is left over at the end of the month. Her advice is to commit money to savings and investments first and to then work with what is left.
“The very first savings product that I committed to tied me in for five years and had annual escalations built in. The power of compound interest worked for me and after five years those savings helped me to buy my first property.”
Ramjee says she has also committed the maximum allowed monthly contribution to her pension fund and has debit orders set up for other investments.
“I also don’t open the regular statements I get from the various investment vehicles. I find that I am less tempted to access the money if I don’t know how much is there!”
Be savvy and take calculated risks
Magda Wierzycka, CEO of the Sygnia Group, believes in taking intelligent, calculated risks.
“My best financial decision has been to leverage over and over again.,” says Wierzycka.
While debt is generally frowned upon in financial planning, Wierzycka says she has always considered the opportunity to borrow money at lower interest rates and invest in something with a reasonable probability of achieving returns over and above that interest rate too good to ignore.
“I am not talking about running up short-term debt on your credit card in order to buy a pair of Prada shoes, which I have been known to do as well. I am talking about taking calculated investment decisions.
“Early on in my savings life I borrowed money to buy a house and started paying it off as quickly as I could. The buffer that I built up in that mortgage bond allowed me to withdraw the money when an opportunity came up to buy shares in a business I was running.”
She has subsequently used that tactic over and over again. She admits that this strategy is not without risk, but points out that there is a big difference between intelligent, calculated risk and risk for risk’s sake.
“In all these cases I backed my own judgement. I have largely operated in the sphere of financial services, but the strategy can be applied to any business sector. The only proviso is, if you do this, do it in areas where you have expertise, where you can apply your own judgement and where you are largely backing yourself. Do not be lured by random investment opportunities which you do not understand and which are most likely going to turn into Ponzi schemes.”
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