Money LESSONS FROM A SOCIAL EXPERIMENT
Maya Fisher-French shares her experience of following the One Rand Family
If you haven’t followed the trials and tribulations of the One Rand Family, which aired on e.tv during July, it is really worth catching it on YouTube or the One Rand Family website, at onerandfamily.sanlam.co.za. The project was sponsored by Sanlam and followed the experience of a relatively well-off family living on cash only – R1 coins, in fact – for a month. The family’s income was paid out in the coins, which were put into plastic containers – or skhaf’tins.
The series has resonated with many South African families who realise they are not alone when it comes to trying to figure out where all the money goes during the month.
I was fortunate to be involved in the project from the beginning and spent some time analysing the family’s budget and spending patterns. Their financial story is a mirror of the average South African household.
Before the show started, the family was asked to write down their budget. At first glance, it looked as if they were coming out each month – but only just. However, a closer look revealed that they had left many expenses off the list. This highlighted that the family had not put a budget together before and did not have a real idea of how their money was spent each month.
As Londi, the mum, admitted, she swiped her credit card without even thinking about whether she could afford it.
It was clear from the beginning that the family was in for a nasty shock when their money ran out before the end of the month. In the final week, they were forced to borrow money from the producers of the show to meet repayments for their BMW. This made them realise that, despite having well-paid jobs, they relied on credit each month to survive.
The family faced their biggest shock when all their money was put into piles and they realised their credit card repayments were equal to their pension contributions. We are not even talking about the amount that went to the mortgage and car repayments each month. The family spent more money on paying bank interest than on contributing to their future. In this scenario, it is impossible to grow wealth – in fact, they are contributing to the wealth of the banks’ shareholders at the cost of their own financial security.
Nearly half of Londi’s take-home pay went to repay her car. When both of the couple’s car payments plus insurance and petrol were combined, it comprised half their household income. While Londi justified her car choice in terms of status and the fact that it made her feel good, the reality was that they simply could not afford their cars, which had a major impact on their ability to grow real long-term wealth. In the last episode, the family realised they were living one car payment in the red each month.
In the beginning, Sbu, the husband, believed his wife was responsible with money and thought carefully before she spent. Londi admitted that this was nowhere near the truth and she often hid her purchases – but she, in turn, believed that Sbu was good with money.
In the end, they both had to realise that each of them had to take responsibility for the finances in the household and hold one another accountable.
In order to improve your financial situation, both spouses have to be committed to the process and take collective responsibility for the family’s financial future.
The virtual method:
It is very easy to get into debt when you have a piece of plastic that allows you to buy stuff without really knowing if you are spending your money or the bank’s. As Rafiq Lockhat, a clinical psychologist, explains: credit cards were designed by psychologists to make you spend money you don’t see.
When the family was on holiday in Durban, they realised they spent half what they normally would have because they were using cash instead of credit cards.
The cash method:
With a limited number of coins and no credit cards to fall back on, the family had to make every R1 count.
When faced with a limited budget, Londi started to actually look at the prices on the shelves for the first time and made more informed buying decisions when grocery shopping.
The family found less expensive ways to entertain other family members and friends – and discovered the joys of the simple pleasures in life.
From thinking about cars as a status symbol, they started to see them as “a lot of skhaf’tins” and, in the end, for a woman who lives for her credit card, Londi took the dramatic step of cutting up hers, with the full support of her family.
Change is possible, but it starts with awareness.
The One Rand Family lived on cash only – in R1 coins – for a month, and realised that they were spending more than they earned