MICHAEL BOWREN is the co-founder and CEO of financial-comparison site fincheck.co.za
FLORIS SLABBERT is the director of financial-services firm Ecsponent.
Behavioural economist DAN ARIELY is the co-author of Small Change: Money Mishaps and How to Avoid Them (Bluebird).
HOLLY MACKAY is an investments expert with 20 years’ experience.
Someone who pays their bond at month-end tends to spend more in the month than someone who pays straight after payday. Why? Well, we all know the bill is coming, it’s just that we see a healthy balance and get a false sense of wealth. Rearrange direct debits so they all get paid just after you get paid – you will feel poorer, but this is guaranteed to make you richer in the long run.
2 The beauty of this tip is that you can be instantly better off, just by switching current accounts: small bank-charge savings add up. It’s never been easier and the banks do most of the paperwork to help you switch. Best buys include Standard Bank’s AccessAccount, which, with a monthly charge of R5,30, slightly undercuts Capitec’s Global One card with its R5,80 monthly fee. Always read the small print (there may be a minimum balance requirement, for example).
If you’ve ever been on a diet, you’ll know how miserable it can be counting every kilojoule. It’s a similar story for budgeting. If you count every cent, life becomes boring. Instead, lump all optional spending into one pot and enjoy trade-offs, like a glass of wine after work instead of buying lunch (make your own).
This is another clever behavioural trick. People who get paid monthly tend to spend too much at the beginning of the month. Create a weekly budget for discretionary spending instead. Start your week on a Monday (if you start at the weekend, you could blow your budget for the rest of the week). The incentive is, if you manage to spend less during the week, you will be able to indulge at the weekend. If you get your budget wrong, you can live frugally for the weekend and get back on track the week after. This is a great – and quick – way to change your spending behaviour forever.
What are your biggest regrets when it comes to your finances? Looking back to the times when we wish we hadn’t spent so much is the best catalyst for changing our financial habits. For many, one of the biggest regrets is going out: we ate too much, spent too much. Or perhaps you have a habit of buying clothes you never wear. Whatever your money regrets, try to identify them. Then set a rule going forward. For example, you will only have a starter or a dessert, but not both.
This is a bit like going to the supermarket when you’re hungry – you end up buying more. Research from the MoneySuperMarket, a UK price-comparison site, found people spend £104 (about R1 805) more a month (R21 660 a year!) if they shop when stressed – with clothes and takeaways the biggest expenses.
A swipe or tap of the card makes it far too easy to spend. Leave your cards at home as often as possible and stick to cash. Half of us say if we had to pay cash for impulse buys, we would think twice – or not buy at all. If that is too much of a struggle, try the 5:2 approach – five days of cash, two with cards.
It’s known as the ‘hedonic treadmill’. You start flying business class, it’s a treat and gives you a thrill… until it becomes the new normal and you no longer get the same sense of excitement out of the extra spending. The same applies to more expensive wine, better cars, exotic holidays. Don’t get used to a lifestyle you can’t afford.
It seems counter-intuitive, but if you have credit cards, store credit and an overdraft, it’s the easiest way to boost income and banish debt. You reduce the monthly admin costs involved in repaying many creditors by consolidating your debt. A debt consolidator negotiates a lower interest rate with your creditors, paying them off to inherit the total debt. You pay one monthly fee to the debt-consolidation provider (try Old Mutual or African Bank) to quash debt.
Most pay rises are given in March or April after the financial year ends. Put 10% of this extra cash into a regular savings account, or a Tax Free Savings Account that invests in a low-cost exchange-traded fund (ETF). Easy Equities has many ETFs on offer, with no monthly account fees (but a 0,25% brokerage commission per transaction).
Many employers now make it mandatory to join the company pension scheme; some offer a top-up as well – which you may not be aware of. Ask the HR department if your employer makes any contributions. And, remember, SARS allows tax deductions – up to the value of 27,5% and limited to R350 000 a year – for contributions made to a pension or provident fund, or a retirement annuity.
Most of us have a jar/drawer/pot for loose change and it’s amazing how quickly it adds up. For a techy version, try the Stash by Liberty app (free for Android). Every time you spend, it will round up your change and save it in a Tax Free Savings Account invested in South Africa’s top 100 listed companies. So, a R25,70 cappuccino will be rounded up to R26 with 30c to invest. The money can be accessed at any time and there are no withdrawal limits.
Rumour has it interest rates may be hiked this year. Play it safe by fixing your home loan while rates are still relatively low. Talk to your lender about fixing options, then speak to bond originators like BetterBond or SA Home Loans for competitive offers.
Like hunting down the back of the couch for lost coins – only, you hunt online! R41,6 billion – that’s the total amount of SA’s unclaimed pension-fund benefits. Think you are due unclaimed cash? If your ex-employer can’t help or no longer exists, e-mail the Financial Sector Conduct Authority at Pensions.UBQuery@FSB.co.za to query a claim.
Check your statements – there will be debits going out for things that you no longer need. Cancel anything that you don’t use. As for charities, cancel your direct debits and, instead, shop through a programme like Legacy Lifestyle. Membership is free and you earn ‘Lifestyle Rands’ shopping at their brand partners, such as Dis-Chem. When you choose to support any of their partnered charities (from The Sunflower Fund to Kitty & Puppy Haven and more), these beneficiaries get 5% of the Lifestyle Rands you earn; see legacylifestyle.co.za w&h