Sweet, sweet sound of a deal
FINANCIAL NOUS: DO YOUR SUMS BEFORE YOUR NEED FOR INSTANT GRATIFICATION KICKS IN
Easy listening was not worth the price, but the financial lesson was invaluable, says the author.
Financial education isn’t a trend, it’s something we all need, so we don’t make avoidable financial mistakes. Not being financially savvy can have a significant impact on the quality of the life you live and place limitations on your future.
Do we need to become investment portfolio experts who understand leverage, or worldly economists who can predict currency movements? No.
But we do need to become more financially literate by learning basic financial concepts. In 2014 I was driving Kedibone – a used, hand-me-down 2005 VW Polo. Kedibone is Sesotho for “one that has seen it all’, apt for her, having been driven by four different people. By the time I got her, she was missing a few parts and was a bit wounded.
Kedibone was missing a car radio – a crucial element for a young 20-something who wanted to cruise Johannesburg.
One morning I walked into an electronics shop, determined to fix this. I wanted a simple radio with AUX, USB and bluetooth. Nothing fancy.
But, knowing nothing about car radios, I was at the mercy of an overly excited sales guy.
He smiled and said: “I have just the one for you.” He pointed to a fancy-looking radio with a R1 800 price tag.
I’d Googled the night before and, to my knowledge, car radios were around R600. “Why is it so expensive?” I asked.
I then got the full-on sales pitch, buttered and sprinkled with fairy dust. This was “the future of car radios”; it basically did everything.
I was sold, but my bank account wasn’t. I began to head out, telling him I only had R800 and would have to look elsewhere. He barely let me finish my sentence.
“That’s no problem,” he said. “You can buy it on credit and only pay R178 for 24 months. Beware the smiling sales guy “I can make the deal even sweeter for you – we’ll install it for free,” he smiled.
I needed no convincing; R178 a month for just two years was manageable. I didn’t realise I was signing up for a costly, unsecured loan, at a 23% interest rate.
The numbers may look small and irrelevant, but for many this is the gateway to numerous financial mistakes.
Many of us take on financial agreements and products without fully grasping the implications. It was a car radio that time; next time it might be a car, running to hundreds of thousands of rands.
I could’ve saved for that car radio, and it would have taken less than a year to buy it. But a quicker, detrimental option was offered and, giving in to instant gratification, I took it.
Understanding concepts like budgeting, savings and interest rates isn’t just for the wealthy, or to make you rich. It’s about learning to manoeuvre through life and secure your financial future.
So pick up a money book, or look to Moneyweb for pointers on ramping up your financial literacy.
Mashile is the founder of Financial Fitness Bunnies and Bunch of Winnaz.