By Nicholas Bezuidenhout

The first step to financial wellness is to create disposable income to invest for the future and to stay out of unhealthy debt. To create disposable income, you need to earn more and/or spend less. This is similar to any weight loss plan where getting in shape, no matter what nutrition or exercise regime you choose to follow, ultimately involves the hard work of moving more and eating less.

You may earn more by creating an additional source of income or taking steps to earn a higher salary but this is not always that easy so we will focus here on ways to spend less. So, what are two common behaviour traps that lead us to getting into debt or spending more than we should and how can we sidestep these?

1.    Pain avoidance

When it comes to going to the gym or exercising, we will often find any excuse not to do it because initially it is very sweaty and uncomfortable! This is like paying for something with cash or our debit card where we see the money go out of our wallets or bank balance, causing immediate physical discomfort. The discomfort happens because we realise that the money we just spent was actually ours and we start wondering whether spending R18 000 on the new iPhone 12 was actually worth the number of working hours, days or months it took to earn the money! It also results in us going through the uncomfortable thought process of considering what else we could have spent the money on and what we have sacrificed for this purchase, known as the “opportunity cost” – will there still be enough in our bank account to cover the rest of our debit orders, our kids’ school fees, our groceries?

Because of this emotional rollercoaster it is so much easier to whip out the credit card or the payment app on our phone, like a cowboy at the O.K. Corral, to buy what we want whenever we want. The reason this is so easy is because firstly and at least initially our bank balance stays the same and it is not our money that we are spending. Credit cards have enabled us to have immediate gratification with the pain of paying coming much later.

This is not a problem if you are able to pay off your credit card every month but all too often our credit card balances keep growing until the interest alone costs us thousands every month. Credit cards do have their purposes for emergencies such as paying for emergency medicines or the tow truck when we breakdown in the middle of nowhere, but they should really be limited to that – emergency expenses only!

If you want to get your spending in control then do what you can to avoid spending on credit, put your credit card (wrapped in plastic) in a block of ice in the freezer, lock it away in the safe or give it to your trustworthy and ferocious mother-in-law for safe keeping and get into the habit of only spending with the money you have saved up in your wallet or in your bank account via your debit card (please cancel or avoid the overdraft facility!). The truth is that, like exercise, once you get into the habit and have passed the initial period of discomfort it is extremely fulfilling as you start to see results, your bank balance growing instead of shrinking, and as you come to realise that you are indeed in control of your own behaviour. You will also become an expert in weighing up whether it is worthwhile to spend money on something as you realise that every decision to buy something is a decision to sacrifice something else.


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2.    Relativity – Sales, special offers and get-one-free deals

Whilst sales and special offers sound enticing, we usually fall into the marketing trap of buying things we don’t actually want or buying far more than we need. We end up spending way more money than we intended just to save a percentage on the additional item.

For example, you go to the grocery store in search of guacamole for your once-a-month home nacho and movie night and when you arrive at the aisle 5 shelf, proudly displaying the guacamole, you see that there is a special: buy two get one free! This is too compelling to resist, as in effect you are getting one third off, and you end up spending twice the amount of money that you intended to because let’s face it, you actually only needed one tub for nacho night! Aside from reducing your bank balance you also end up either overeating or with some mouldy guacamole after a few days!

Having said this, specials and buy bulk and save items have their place if they are offered on essential items such as toilet paper and toothpaste and you are getting a discount on the usual price by buying more. To decide whether to go for these specials we need to become experts in what is known as the “time value of money”. For example, if buy buying 10 family packs of toilet paper gives you a 5% saving, knowing you will only use it over a year, is it worth it when you could have taken the money for the other 9 packs and paid off some of your long overdue credit card debt saving interest of 16% over a year? As a rule of thumb, if you are going to use the item in the next year and the discount is less than 10% it may be best to only buy it when you next need it!

Now, imagine if these sales and special offers inadvertently cause you to buy more than you need a few times a week, you can very easily end up spending hundreds or thousands of Rands more that would be better put towards reducing debt or saving for your future goals and dreams!


For other tips on how to reduce your spending please refer to Nicholas Bezuidenhout’s  blog post, “Living Lean” https://nicholasbezuidenhout.com/2019/07/22/live-lean-make-your-assets-work-for-you-rather-than-the-other-way-round/



More about Nicholas Bezuidenhout

Nicholas is an Actuary and Certified Financial Planner® professional specialising in retirement planning and investments whilst helping people protect their and their family’s financial well-being. Please follow Nicholas at https://nicholasbezuidenhout.com/ and https://twitter.com/nick_bez