While researching the budget section of my blog, I came across the R1 family, a social experiment together with Sanlam.
When I spoke to my mom and editor, she remembered that in 2014 Sanlam ran the R1 man experiment for the first time.
I watched the R1 man (name unknown) and the R1 family or S’bu, Londiwe and kids. It was an eye opener and I learned so much from this experiment. I had already changed my money habits but this got me thinking about more than spending money but also about the psychology of money.
- Car and home repayments are our biggest expenses. People often buy their car, or house, as a way of showing how well they are doing. This makes them buy a top of the range car when they only need a middle of the range model. They buy houses at the maximum repayment for which they qualify. So if they qualify for a R500 000 bond, they buy a house for that amount when they can get a house big enough in a less affluent area. For observant Jews the areas are a little more difficult as not using a car on Sabbath means that you have to find a house near a Synagogue and, unfortunately, or fortunately, these homes are usually in more upmarket areas.
- South Africans view a pension contribution as an expense not an investment. If your employer pays contributions to a pension fund, request that your contribution is the maximum option. It is for your future.
- If you don’t use a shopping list when grocery shopping, you shop using your emotions. Always make a grocery list and never shop on an empty stomach. If you shop without a list, you wander up and down the aisles and take things off the shelf that you want, or feel like, and not what you need
- Always round up not down. I didn’t know that people round down! Remember R1.99 is R2 not R1!
- Using your credit card, an average item that is marked R20 actually costs you about R24. Banks charge interest on credit cards, as do 12 month credit store cards! So if you use a store card that offers 6 or 12 months, always go with the 6 months as this is usually interest free.
- Save first, spend later. Decide how much you want to put away for saving and do that before you spend any money. R100 a month into a savings account is a good minimum but you can choose your own amount.
- Our spending habits/psychology is established by age 7. Kids learn by watching. If they see you buying indiscriminately, they will do the same. If you don’t look after your things they won’t either.
- South Africans spend 76% of their income on servicing debts. Try to pay off your debt and not create more. This, I think, is one of my families’ most difficult challenges as it is for a lot of families. Clothing store debt! The kids keep growing and they need clothes so, just as you think you can pay it off, the next season arrives and last seasons clothes no longer fit!
Do you know where your money is going every month? How much debt are you in? Do you think you could live on your money, with no credit, no internet banking, strictly cash for a month?