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4 Ways to work smarter with your money

Picture: Unsplash
Picture: Unsplash

A shift in mindset can go a long way.

The past two years has everyone considering how they work with their money now and how it will affect their financial future. Additionally, despite the vast amount of information and services out there household debt among South African consumers remains at an all-time high and has been further exacerbated by the impact of the COVID-19 pandemic.

So how do we navigate these difficult times, avoid debt and still invest money for our future? Below, the financial manager at Teljoy Saul Gur and Senior Investment Consultant at 10X Investments Michael Rossouw share 4 tips that will help you look at things differently and manage your finances better.

How to get comfortable talking about money

Saul Gur: Money, not unlike sex, politics and religion, can be a difficult and contentious issue to talk about. Finance talk is usually fraught with emotion, whether we have it in abundance or are struggling to make ends meet. Our financial decisions impact every aspect of our lives, which is why it’s crucial to become comfortable talking about it.

Money deals with numbers. There's an expectation that our behaviours when managing it are rational, but that’s seldom true. As it’s bound up with our greatest dreams and deepest fears, it’s arguably the most fraught and loaded topic of them all.

Consider what it is that you like and fear about money, what it means to you, how it fits into your life, and how it influences the way in which you relate to other people, as part of an attempt to understand your own feelings about money. While these are always changing, if you’re clear about money’s role in your life, it becomes easier to discuss it with partners, children, parents, employers and even friends.

How to divorce from debt

Saul Gur: Everybody from Ralph Waldo Emerson to Warren Buffett has a quotable quote about debt. Whether you see it as the enemy of wealth or stealing from your future self, the consensus is that high-interest debt is a bad idea.

Yes, debt should be avoided but rejecting it outright simply doesn’t account for the reality of life in 2021. We’ve all had to resort to costly credit when the fridge unexpectedly stopped working or your laptop was stolen. Life happens, which is why part of better managing our finances is looking to safer, more flexible ways to meet our needs.

Why consider access over ownership

Saul Gur: One of these more flexible alternatives is the rent-to-own model, a transactional system that offers the consumer the convenience of access to things like furniture, appliances and electronics, without the burden of ownership.

In markets like the US and UK, rent-to-own is increasingly popular as it offers consumers a way of acquiring the things they need without getting tied into costly hire-purchase agreements or having to take on high-interest debt simply to have a functioning microwave oven.

Rent-to-own removes the risk and cost of debt from the equation and introduces a level of convenience that an outright purchase simply cannot offer: Consumer goods like appliances and electronics, and even furniture, need to be replaced every few years anyway due to wear and tear, so it just makes sense to rent rather than buy.

Michael Rossouw on the real cost of “low” fees

While any type of saving is better than no saving at all, the administration fees of some savings products can significantly impact the value of the investment over time. In fact, high fees on a retirement investment can reduce the total value of the investment by as much as 40%. The industry charges an average of 3% in fees for retirement savings products when there are high performing products on the market that cost less than 1% in fees.

An extra 2% might not sound like a lot but you are talking about a percentage of your entire pot of savings. Over 20 years, that 2% per year can add up and substantially reduce the total savings and can mean the difference between a comfortable retirement and lowering your standard of living to survive.

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