South Africa has just finished National Savings Month – and authorised-financial-services-provider-terms-and-conditions-apply Sanlam sponsored a new web series: The One Rand Family.
It. Is. Awesome.
For the email subscribers, here are the first two episodes:
Well worth the fifteen minutes or so of your time.
If you don’t feel up to watching it, and you missed The One Rand Man from last year, the premise is this:
- The family doesn’t know what it’s spending because everyone just swipes with their debit/credit cards.
- So take that ability away, and make the value of money painful and obvious by giving this two-income household both those incomes in R1 coins.
After they’d divided all those coins out, the allocations:
I think that my favourite moment was Sibusiso’s facial expression when he laid out the tax liability. Because almost as much as the bond…
And by the time they were done with the debit orders (which were all paid in one rand coins, by the suitcase-full), they were left with:
Which would ordinarily have been topped up with credit cards – but not in July.
Anyway, some observations:
- I think that people will pay too much attention to that tax bill. But honestly, despite those boxes of coins, I reckon that the tax payment is fictional when you’re an employee. In two ways:
- First, your salary arrives with the tax pre-deducted – so when you talk about what you “earn”, you’re already discounting out the tax. Almost as though it was never your money in the first place.
- Secondly, for many people, it really wasn’t their money in the first place. When you negotiate your salary, you negotiate your take-home salary. The tax side is grossed up by the employer to make it so that your take-home is your take-home.
- Y’all know my feelings on bond repayments (here’s a link to all the posts tagged Rent or Buy – and you’ll need to read from the bottom up). But given that this family is already living in credit, I can think of no better savings mechanism than their bond repayments.
- Just to reiterate though:
- Bond payments are paying rent to the bank, with a bit of savings; and
- Car payments are paying rent to the bank, without the savings and with the interest.
- On the credit card front, the family is only paying their minimum repayments. To me, that doesn’t make sense. Unless I’m missing something, surely the best and easiest thing to do with credit cards is arrange for your debit orders to come off about five days after your credit card payment date – and then you transfer all the debit order money into your credit card, and then transfer it all back out again in the new payment cycle? I realise that doesn’t address the “living on credit” problem – but it can certainly alleviate the money lost in interest… But I’m new to credit cards – so perhaps there’s a catch that I’m missing.
My final observation is that there seems to be a lot of spend-justification going on. As in: “I work very hard for my money – so why shouldn’t I spend it?”
Genuinely, I don’t think that’s necessary. It sounds like a puritanical vestige – as though any kind of enjoyment has to be paid for in toil and sweat.
If you’re fortunate enough to be in a position where you earn a lot of money and you don’t have to sweat too hard for it, then my view is that you really shouldn’t sweat it. You’re lucky and that’s okay. There is nothing wrong with enjoying it.
I mean, I don’t see many attractive people walking around trying to pretend like they work harder than the ugly people at looking attractive, in order to assuage their guilt over scoring hot romantic partners. Or those with 20/20 vision claiming that they just take better care of their eyes than the blind, so that they can feel better about being able to watch The Good Wife.
Sometimes, life just deals you a good hand. No apologies required.
On that note, Happy Monday. And I’ll post Part 2 when I’ve watched the next two episodes.
Rolling Alpha posts opinions on finance, economics, and the corporate life in general. Follow me on Twitter @RollingAlpha, and on Facebook at www.facebook.com/rollingalpha.