A young mining engineering graduate, Oratile Sono, a native from the outskirts of Brits in Modikwe Village, compiled a very interesting list in an effort to help individuals with their spending habits and how to avoid the silly financial mistakes that need avoiding at all costs.

“I am not trying to tell you how to spend your money”, said Oratile in a private (shared amongst friends) Facebook post on Tuesday.

In South Africa, people who are in debt are increasingly outrageous, and employed individuals are made to believe they can afford expensive and unnecessary items. In truth, nobody wants to be told how to spend their hard-earned money, with Sono having said that, the idea is to guide you to make wise decisions.

Most, and both unemployed and employed, People resort to aMashonisa when things get tougher, and end up repaying endless interests. The Mashonisa are legal and within the law, but any unlawful acts like confiscating ‘IDs’ and/or ‘banking cards’ should be reported instantly. The young mining engineer graduate noted down the list of financial errors to be avoided.

1. Cellphone value shouldn’t be higher than your monthly salary/income

In this lifetime, we all want the finer things in life, including the luxurious and expensive phones of our time with innovative technologies for convenience use. It is unfortunate that most people purchase items they can’t afford.

An individual who earns R2 000 a month, cannot afford to purchase an item worth more than their salary/income.  It’s a bad investment – Rather consider saving as little as possible and find a cheaper item with the same features as of the item you need – if you feel like you are settling for less, it is most probably the case of self-inflicting yourself to overspend.

If you are obliged to pay small monthly payments of a cellphone that’s higher in value than your income, that doesn’t necessarily mean that you can afford the item, because if you did, you would’ve paid it in cash without hurting your balance (considering your monthly spend). Yes, paying smaller monthly fees, may give you a false illusion of affordability, eventually, you find yourself adding more obligations resulting forever in unpaid debt leading to bad records.

2. You shouldn’t pay a car for more than 4 years

The purchase of a vehicle should smartly be calculated considering why is there a need for a car.

  • Is the car going to be used for business, going to work, for social visits or all the mentioned?
  • Are you financially stable, and will you be able to meet your monthly obligations?
  • Is the car’s value more than your annual salary?

Sometimes we find young individuals purchasing expensive luxurious cars unnecessarily – however, for as long as you can afford all the ‘nicer things’ in life considering all other aspects such as investing, you are more than welcome to spend however you wish.

If you need a car to travel to work and you find it will be most helpful for your convenience and be able to handle life easier, I would suggest paying a huge amount of a ’deposit’ for the purchase of the car, scratching out at least a year or two of your monthly payments.

You can also consider a second-hand car. A second-hand car doesn’t necessarily mean it’s a ‘skorokoro’, it only means someone else used it before and they are no longer interested in the car. Second cars are cheaper and affordable. With R100 000 you are most likely to find a fresh car that you can drive for as long as 5 more years.

If the car is more than your annual salary, you are opening a hole you might not be able to close, and it will definitely get bigger.

Consider earning R25 000 per month, annually that’s R300 000 annually, consider purchasing a car that’s 50% or less than your annual salary to avoid unforeseen circumstances. Consider Life Insurance or Debt Protection at all times when you have a lot of debts. However, even when you are not in debt, life insurance is very vital, especially when you are a family man/woman or are a breadwinner and/or have dependents.

3. The value of your car should be equal or less than your annual salary total

To be on a safe side, should you consider purchasing a car that’s equal or less than your annual salary in total – ensure that you pay a hefty deposit and pay it off in less than 4 years.  As mentioned above, I prefer 50% or less of your annual salary, this will open a room to save and pay it off sooner resulting in a strong credit score.

4. Never finance your car via residual /Balloon payment

This is a viable solution especially when you are low in cash at the point of purchase – however, this can bite back. A balloon payment is a portion of that’s only payable at the end of the loan agreement Imagine a balloon payment of R50 000 payable at the end of a 5-year loan agreement, which could be about 20% – 35% of the selling price.

People tend to forget Balloon Payments, and when the time comes to pay, one just has to- and you don’t want to find yourself cornered. Most people finance their cars through WesBank, and what it does is it sends notifications 90 days before the end of the contract to remind you of the outstanding balance.

You might find yourself refinancing your loan, leading to more obligations.

5. You shouldn’t be paying a home loan for more than 10 years

This is a great investment, and it is better to start early in life at your 20’s to finish it off nearer or early 30’s to fully enjoy the benefits of having a house at an early age. It is very advisable not to pay a home loan for more than 10 years. You can do so by paying extra cash into your bond account, and it won’t be easy but definitely doable.

A lump sum every now and then is advisable; a bond may typically take 20 years, tone it down and set a date to pay off your bond within 10 years.

6. No to clothing accounts

Are you In need of a scissor? I have plenty but do not ask me what it is that I use them for; I don’t mind borrowing you one to start literally cutting your clothing cards. Pay off all your clothing accounts and never look back.

If you do not have clothing accounts, then that’s great. A clothing account is like a debt that you can’t rid of.

7. No to furniture debt

The same vehicle that delivered your furniture may come to collect them back due to bad repayments. If you were to purchase furniture, ensure you pay it in cash at all-time no matter the cost. It is important to consider

8. No to credit card

Yes, a credit card can be very helpful, however, Oratile wants to shine the light on young South Africa who overspends the money they don’t have. I can’t find any joy in spending money that isn’t mine as it has to be repaid no matter what.

You don’t need a credit card to live a better life, you need to bank better and make better wiser decisions. Say NO TO CREDIT CARDS and YES TO INVESTMENTS.

9. You shouldn’t spend on entertainment in a single what you make in a single day work

This is one of the most interesting facts which I personally never considered. So here, when you find yourself making R250 a day, do not find yourself spending over R250 on entertainment, but you can spend that much and more on things most important to you.

We still have young individuals who work odd jobs, making a couple of thousands in months and spending it all within 3 days just after getting paid.

10. You should only buy an item if you are going to use it for more than 10 times.

Consider reusable items and or those that will last you a while when making purchases. Don’t feel pressured even when you want to purchase an item that can only be used once, you may when necessary and/or when you can truly afford it, and one needs to truly understand the meaning of affordability.

11. Don’t spend first and invest after.

It works contrariwise – invest first, then spend, ensure your future is secured financially before you unintentionally to overspend. Investments provide financial security and income with the interest/cash earned from saving.

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