Magda Wierzycka: When it comes to your money, trust no one.

Magda Wierzycka is the chief executive of Sygnia, a JSE listed asset multi-manager company, which, through FinTech and because of low fees, is disrupting the market. She was placed 34th on the Sunday Times rich list in 2016 and she's holding over 65% of Sygnia shares which are worth R1.47-billion. She has a an actuarial science degree from the University of Cape Town and has held management positions in companies such as Alexander Forbes and Coronation. In this interview she talks to us about lessons she's learned about money.

In this economic climate, have you downsized your lifestyle at all?
I grew up in a 30 sq m flat in a concrete apartment block in a communist Poland in the 70s. We had 2 bedrooms,3 children and my grandmother. That's why anything bigger than that has always seemed like an extravagance to me.  I am not sure I ever understood the concept of a garden.
So, recently we downsized from a large house to an apartment.  The move was motivated by our children leaving home and a need to simplify, rather than economics, and I have been amazed at how many unnecessary costs we have cut out.
What I enjoy about the area is that the property rates are lower, there is no garden or pool to maintain, our electricity usage is more considered, security is paid for by all the residents, and as storage is limited you need less of everything.  For anyone struggling in this climate, I would thoroughly recommend moving to a smaller place with fewer frill expenses.

Do you ever worry about money? … about having enough?
My relationship with money is best defined as complicated. We arrived in South Africa in 1983 with R500 in the bank having spent a year in a refugee camp in Austria.  I was 13 years old.  My father took out loans from as many banks as would lend him money (this was before the National Credit Act was introduced), and juggled multiple credit cards just to pay the bills.  I had to enroll for a university degree that I did not understand simply because it offered me a full bursary.  I became a vegetarian because I could trade-in my meal vouchers for cash to buy clothes.  So, on the other extreme, when I joined the financial services industry, more by luck than design, I was suddenly exposed to very large sums of money.  This meant I could suddenly afford a lot of things.  My first bonus paid for a Toyota Rav4! This polarity has made me extremely unmaterialistic.  I could lose all the possessions I have tomorrow and not care much. I have a core belief that I could pick myself up and rebuild what I have lost hence I enjoy being able to experience life by having money, but I roll up my sleeves to earn it

What are you doing to remain positive about your family's financial well-being during these tough times?
I have been brought up to never rely on anyone to support me financially.  I have lived through some very lean times, but I have always had a core belief that I can bounce back based on sheer hard work. However, what I have found in life is that many people do not appreciate what hard work really means.  Hard work means working through every “holiday”, every weekend, every evening.  You can never really switch off.  That is what got me through the lean times, allowed me to build up businesses and ultimately placed me in a position where we are financially independent.

Do you and your husband share equal responsibility when it comes to your household finances?
We comingle all our finances as we have always regarded our marriage as an equal partnership.  That has been easy to do as we both work.  In situations where only one partner works, however, I think the issue of budgeting becomes a lot more important and complex.

What are you teaching your sons about money?
From when they were little our children were taught that to have money you have to work damn hard.  I have always told them that their legacy will be the very best education we can buy for them, but after that they are on their own.  We have also taught them that they are very fortunate to be born into prosperity and that sharing with others less fortunate is important.  My sons are both extremely generous, quite thrifty and prudent, and take nothing for granted when it comes to money.

Out of all your responsibilities (bills, groceries, etc) , what do you find to be the most expensive nowadays?
Food is extremely expensive, as are all the utilities, such as electricity, water and rates.  When faced with monthly bills, I often wonder how an average South African family copes.

How do you define financial independence?
I define financial independence fairly narrowly – it is having a choice regarding the work you want to do.  Work should be a stimulating and enjoyable experience that you feel passionate about.  It should fulfill you and make you happy.  That can only happen if you have true freedom of choice.

What is your number one financial priority right now?
It is to manage my finances better.  I have always done the right thing in terms of saving, but I have paid little attention to diversifying my investments, hence I have tended to accumulate all my money in one investment product, while concentrating on building businesses.  This needs to change going forward.  I need to pay more attention to my own investment strategy, and not just those of Sygnia’s clients.

What's been your best and your worst decision about money?
My best financial decision has been to leverage, over and over again, and use that leverage to back myself.  This may sound strange as debt seems to be an anathema to most well-structured financial plans.  However, 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 is too obvious to pass up.  I am not talking about running up short-term debt on my credit card in order to buy a pair of Prada shoes (which I have been known to do).  I am talking about taking calculated decisions to invest in businesses I was part of running or I have founded.   Early on in my savings life I borrowed money to buy a house and started paying it off as quickly as I could.  The “mortgage bond” buffer then allowed me to withdraw the money to buy shares in a business I was running and understood very well.  I have subsequently used that tactic over and over again.  Buy property, commercial or residential, using leverage, start paying it off as quickly as possible, and then when another personal investment opportunity comes along I use the savings buffer to take full advantage of that opportunity.
From an investment perspective I have to be honest and admit that every time I bought property I lost money.  From the first one-bedroom apartment I bought back in the 1990s, to a large house in Camps Bay that we sold in 2016, I have been poorer for it. I now regard property the same way I regard art, forced saving with positive utility.  Hence the return you get is partly financial and partly lifestyle.
The other thing to avoid is staging opportunities on new listings of shares. Often the hype by far outweighs the reality. Your ability to take short term bets and, after all transaction costs, get out with a profit is questionable.
And, of course all my handbags and shoes, which I am still trying to convince my husband are a good investment!

If you have the choice between buying a home or investing in shares, which would you choose and why?
Every financial theory and analysis says that you are better off renting a home and investing in shares.  However, I believe that most people tend to spend the money they have invested in shares at the earliest opportunity.  Hence you are better off buying a home where the mortgage payment becomes a monthly forced savings account for your future.  If you do have the discipline to never touch the money in the stock market account, and I mean never, not until you retire, then by all means rent and invest in stocks.

When you think of a comfortable retirement, what does that mean to you?
A comfortable retirement means having enough money to maintain the same standard of living as you had before you retired, as well as being able to cover your increasing medical costs.  It also means having enough extra savings to have some fun: travel, go to the theatre, and entertain friends.  Most importantly, it is the ability to keep busy and with the things that you enjoy doing.

What’s the worst money mistake you’ve ever made, if you’ve made any? What did you learn from it?
My worst investment decisions had to do with timing and following the herd; whether it is a hot stock that everyone was punting, a new listing where I hoped to make a short-term profit from trading or taking money offshore after the rand had depreciated.  Paraphrasing greater investment minds than mine:  “Be brave when others are fearful, be prudent when others are greedy”.

What was the last item you regretted purchasing?
My new car after a well-seasoned car dealer told me that you lose 35% of the value of a car in the first three months of ownership.  You are better off buying a used car every time.

Do you have rules for lending money to friends or family?
Yes. I don’t lend money. I give money.  As a child of immigrant parents, there are always a lot of demands on me for financial help.  When I “lend” money, I never expect to be paid back.  Hence there is never any tension around this.

Why do you think we so easily fall into debt these days?
Because loans are too easily available, people never tend to think long-term and too many of us seek instant gratification, even when we know we cannot afford things.  Once you are in a debt-trap, you start living month-to-month.  It takes true financial discipline to dig yourself out of a hole.  It is painful and tough, so we tend to just keep rolling over debt.

Can we build wealth by just saving?
Absolutely. The only way to build wealth is to save as much as you can afford, starting as early as you can.   If we all live 30% longer than our parents, which we are likely to do given the rapid advances in medicine, we will need a lot of money to retire and live off.  Much more than our parents ever did.  Hence, saving is not about building up wealth.  It is about long-term survival.

What's your advice to women who are worried about investing in the stock market?
Here are my most important tips based on personal experience:
1. From my first pay-cheque (R2 500 per month) I put the maximum amount I could into my retirement fund.  I preserved that money every time I changed jobs. I never checked my statement or balance. I have a core belief that that money “out of sight, is out of mind” and should not be touched until I am 65.  This has meant that I have accumulated a very comfortable retirement pool completely outside of any other money I have made.
2. Working in asset management I have always been conscious of the fact that management fees mattered.  When I worked for an active asset management company fees determined my bonus! Hence the higher the better.  As I grew older and wiser, and accumulated some savings, I realized that fees destroy value.  Today fees matter to me just as much, I want to pay as little as I can, hence my love for passive asset management.  So lesson number two is pay as little as you can for long term savings.
3. Unless you are an investment professional do not dabble in share trading.  It is a mug’s game.  You have limited time to absorb all the information needed to make informed decisions.  Hence you are really just gambling on a positive outcome.  Rather invest in a professionally run unit trust and enjoy your leisure time - I do.
4. Use tax efficient savings products, like tax free savings accounts and retirement annuities.  Every penny counts.
5. And lastly, and most importantly, spend some time with Google and educate yourself about finance.  Learn the jargon so that you always know what you are buying and how much you are paying.  When it comes to your money, trust no one.  Always do your own research.

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