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Personal Finances: Are You Sinking or Swimming?

Tinashe Munyati, Chartered Certified Accountant, Fourways

June 21 2018

Sometimes you need to lose money to learn about losing money. And in other times you need to earn money to learn about making money.

When we have enough in our bank accounts, life seems less stressful than when we don’t have enough. Money is a simple thing to understand, and it will treat you well if you know how to use it.

I believe money is like having enough gas in your car. With enough gas, you are able to choose your destination and control how fast you want to get there and who you want to take with you. Not having gas will leave you stuck on the side of the road asking your friends, family and banks for help.

Let’s look at some common ways which will leave you stuck on the side of the road without gas (without money) and also some ways which will leave you with all the gas you need to reach your destination.

Excessive/Frivolous Spending

Great fortunes are often lost one rand at a time. It may not seem like a big deal when you pick up that double-cafe mocha, order that large pizza, have dinner out or buy more clothes, but every little item adds up. Just R250 per week spent on eating out costs you R12 000 per year, which could go toward an extra mortgage payment or a number of extra car payments. When you look at your finances this way, it makes a lot more sense to ensure the small costs don’t get ahead of you.

Misunderstanding credit cards

I used to look at credit cards like having a really expensive friend. This friend might entice you to spend money on things like regular takeouts, entertainment, jewellery (they call it retail therapy), electronics and so on just because you have extra money (which you don’t,) this is actually a line of credit.

I now look at credit cards as my savvy investor friend, who provides me with rewards, financial security, insurance and perks whenever I decide I need it.

One of the most important reasons why I use my credit card is to increase my credit score. But here are some other reasons when I use my credit card vs my debit:

1. Earn cash back or other rewards

Using your credit card to earn cash back or travel rewards on purchases is a smart move. When managed correctly, credit cards can actually earn you thousands of rands a year in rewards just for using them for everyday purchases.

3. Build credit with timely payments

In order to improve your financial life, you need to take out a line of credit or debt (what, really?). Let’s take the example of being an investor. Most investors will only invest in someone who has been successful in the past and has shown a track record of success. It’s really difficult to invest in someone who is just starting out with no experience. That’s how most banks around the world view things. They want to give you a chance by giving you access to a credit card to see how responsible you are in paying the monthly balance (or the full balance each month if you’re smart) before they give you access to a bigger line of credit to buy a house or a car. 

2. Traveling, on vacation or buying airline tickets

The added anti-fraud protection offered by credit cards can be essential if someone steals your card number or you accidentally use an ATM in some tourist trap, designed to harvest card data.


4. Shopping online

Credit cards are by far your safest option to choose because the credit card issuers watch for fraudulent charges. Unlike a debit card, If you detect fraud yourself you can dispute a charge and get it reversed quickly, thanks to credit card issuers “zero liability” policies.


Let’s recap, when should you use a credit card?

– When you’re looking at building a good credit history.

– For rewards providing you between 1 and 2 percent back on every purchase.

– For important purchases to provide greater fraud and purchase protections than debit cards.


Spending money to gain temporary happiness

Many young adults confuse spending money with being happy. You don’t have to splurge two months of your salary on buying the latest iPhone, laptop, electronics or appliances. It’s tempting to live in comfort now, but what happens when you need the money for an emergency or lose your job? Comfort will not help you in times you failed to plan for. Having a long term financial vision will help you when you need it most.

Not setting long term financial goals

One of the most common mistakes that people make is focusing on short-term financial goals like paying off bills and rent. While short-term financial planning is important and necessary, long-term planning is equally important. Short term financial goals can be equated to living paycheck to paycheck. but long term financial goals can be equated to freedom. Having 6 months expenses if you lose your job, 30% deposit for a downpayment on a home or enough to cover your kids college funds are some smart long term financial goals you should strive for.

So now that we discussed some financial mistakes to avoid, let’s talk about how to spend money wisely (and not regret it)

There are usually two ways to smarter spending, usually in assets or experiences. At first you need to be able to generate money from different sources and diversify your income so if the economy, your job or other unforseen events happen you will still have money coming in. This will allow you to be free to do whatever you want while also spending some of the money on experiences and personal development.

Here are some of the ways I personally recommend spending (to save) thousands of rands each month.

1. Buy in bulk

(Hello Makro) soaps, creams, toiletries and anything you can buy at a normal store you should stock up by buying in bulk. Scanning websites regularly for specials, discounts and coupon codes will put more money back into your pocket.

3. Pay at least 20% more on your debt each month

If you want to boost your credit score and live without financial stress, this is a good strategy to follow.

5. Invest in your family’s health

I use the word “invest” and not “save” because without good health, you are only living on borrowed time. A good health insurer will save you, not cost you.

7. Buy on value, not on feelings

If you do buy, buy things that will enable you to save time, be more productive and make more money. Don’t buy things because it’s “nice to have”


2. Create a budget

Simply put, a budget is an agreement between your money and yourself. You are telling your money that you are in control and that your money is not controlling you. Budgeting can only work if you stick to your agreement.

4. Spend money on skills

Spending money on skills that will make you more money in the future is a wise move and will enable you to diversify your income.

6. Master the 30 day rule

Quite often, after a month has passed, you’ll find that the urge to buy has passed, and you’ll have saved yourself some money simply by waiting and realizing you never really needed that item.

8. Create goals for your money

Where are the areas you want to save, spend and invest?

* The steps described in this article will not solve all your financial challenges, but they are a very good start to achieve financial independence. If you would like to discuss some of our financial consulting services we offer, please contact us by clicking on the button below.


This article is for information purposes only and you are advised to seek professional advice from your own accountant as your individual situation will vary.

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