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OneRandMan learns how money really works

(Instagram)
(Instagram)
Cape Town – “The budgeting is going to have to start now,” OneRandMan says, as he looks down at three containers filled with R1 coins, down from the 30 he had when he first received his salary.

Living on only R1 coins for the entire month, a 32-year-old Cape Town-based architectural consultant has found that in our modern, card-based society we have lost our connection with money and no longer feel the implications of our spending. This is according to Sanlam, initiators of the experiment.

After many long hours of counting his salary – paid out to him in R1 coins – on his living room table, OneRandMan divided up his coins into piles to pay all his monthly expenses, and placed them in plastic containers. His expenses include taxes, car payments, rent, pension and medical aid contributions, credit card debt, utilities such as water and electricity, and general spending money.

He is now faced with some nasty surprises.

See OneRandMan's latest episode:



“None of this is making any money for me, it seems a little bit silly. Everything is just going to disappear,” he said. “This is all I have left,” he realises, looking at the containers with his spending money for the month.

OneRandMan’s biggest monthly expense is his car payment. “Too much is going towards my car – I don’t know why I got such an expensive car. I don’t know if it is peer pressure or society – I could easily have got a car for a smaller amount and the rest could have gone to savings.”

Another large expense is his credit card debt. “This really makes you think twice about taking out a loan – how much you have to pay back at the end of the day.”

The power of budgeting

According to Sanlam investments economist Arthur Kamp, a key learning from OneRandMan's experiment is the power of budgeting. “It means understanding how much money you are getting in, and understanding exactly where all of that money is going, as OneRandMan is doing.”

See what the experts say about the latest episode:



Kamp says OneRandMan is not saving nearly enough towards retirement. He says it is interesting to note that he sees his pension as an expense like rent or tax, and not as savings that are in fact making money for him in the long term.

“This is unfortunately a mindset shared by many young South Africans, and one that needs to be shifted to enable them to one day retire comfortably,” he said.

“Looking at his Tupperware budget, his money piles look a bit out of sync in terms of what he is putting away for retirement. His allocation towards his car payment – a depreciating asset – is very high,” he said.

“The important principle here is compound interest – known as the eighth wonder of the world. It becomes very powerful the longer you can let it work. Even very small amounts put away towards savings and retirement when you are young, make a huge difference when you are older.”

He says all South Africans can have a healthier relationship with money by firstly understanding what it is. “It is not just something with which to pay for goods and services, it is also potentially an asset. Every rand that you spend is an opportunity lost to allow that money to work for you by earning interest or dividends, and growing over time,” he said.

“Using a credit card to pay for goods and services is not money – it is someone else’s money that you have borrowed and that you have to pay back, most likely with interest.”

See News24's interview with OneRandMan:



Kamp says it is crucial to start saving as early as possible. “National Savings Month is not only this month, it is every month from the day that you start earning a salary.”

Now that OneRandMan has “drawn up” his budget, he will have to physically manage every R1 he spends from his plastic containers. His bank accounts, bank cards and debit orders have all been frozen for the month, so this will be all he has.

For the rest of July, South Africans can follow his experiences in making large payments in coins, how his usual lifestyle choices are affected and finally how he deals with the end of the month when he potentially only has a few coins left.

* Follow OneRandMan’s story here, and follow him on Twitter and Instagram.

 - Fin24.
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