- South Africans are confessing their big money mistakes after a call from analyst Bright Khumalo.
- Common themes include buying fancy cars, and cashing in retirement savings early.
- Going into debt to supposedly build up a good credit record must be one of the dumbest things people do, Khumalo believes.
- For more stories go to www.BusinessInsider.co.za.
Ask South Africans what their greatest financials mistakes were, and common themes emerge: buying a car they can’t afford, cashing in their pensions mid-career and overspending.
Recently, Bright Khumalo, an analyst and portfolio manager with Vestact Asset Management in Johannesburg, asked his more than 12,000 followers what their biggest money mistakes were.
The responses poured in:
1. Not budgeting when I started working 2. Not paying myself first, saving what was left at the end of the month3. Increasing my spending as my income increased— Manoka (@ManokaMathye) June 3, 2020
From worst to bad:— Tumi Nkosi (@TumiNkosi) June 4, 2020
1. Clothing accounts - the #1 DEVIL.
2. Withdrawing pension money.
3. Not saving from a young age - the more you do it, the easier it becomes.
4. Buying a car on residual if you are not planning to keep it for 6 years or more.
Not thinking of everything as an opportunity cost. The opportunity cost of many random cups coffees I drank is huge, could've been invested in a worthwhile asset.— Dineo Kekana (@Dineokk) June 5, 2020
Not having an emergency fund before investing in stocks. There is no cash for the tough times while you wait for the stocks to appreciate, forcing you to sell some at a loss.— You Don't Own Her (@theko_litsoane) June 3, 2020
Cashing out my investments to pay for my wedding. I would've been so far by now.— Miss_Motheo (@leshoto22) June 3, 2020
Finance a vehicle on balloon payment— Pieter Louw (@pieterlouw) June 3, 2020
Buying the car i don't afford, with money i don't have, pleasing people who don't care.. yerrrr blunder— khojeta (@khojeta) June 3, 2020
Not paying property levies, I later really paid ????— Minister of 5km (@MampuruRose) June 3, 2020
Buying an apartment on online auction only to discover that the place was hijacked. It’s now more than 5 years I’ve never set foot ?? inside that place ??— Thandeka (@Mvakali69) June 4, 2020
Having Hospital cover only with the intention of recovering my costs from SARS. I was a healthy guy... Suddenly became sick and had ridiculous bills trying figure out what is wrong.What I got back from the taxman was a drop and didn't help me to recover financially.— BootZ (@_BootZ__) June 4, 2020
Assuming invoices will be paid on time. Do not count on funds not in the bank— Oreo (@Marna65504138) June 3, 2020
In Khumalo’s own view, the dumbest mistake of all is to get into debt because of the belief that it will help you build up a good credit record – for if you want to one day buy a property, for example.
“Do people not know that your student loan counts as a loan towards your credit score? This one is up there with buying a German machine on credit to please colleagues and friends.”
Many people fail to delay gratification and use credit for basic consumables that should be bought in cash, he adds.
Another mistake he has seen is people who “jump into the stock market head first” – without building an emergency account equal to at least a year’s worth of your monthly expenses. When markets start to tank, and you quickly need cash to deal with an emergency, you may have to sell at a loss.
Emergency accounts should be kept in risk-free assets like 32-day notice accounts, he believes. “No need to get creative here,” says Khumalo.
Even when they don’t need the money urgently, often people sell shares at the bottom of the market, losing confidence that their investments will ever recover.
The solution is to only view your share statement once a year, and not to stop investing monthly amounts even amid market mayhem, he advises.
Other big mistakes are taking on debt for someone else in your own name or standing surety for someone else - “the long-term consequences are dire” - or falling victim of some scam like a Ponzi scheme.
You can avoid some of the biggest problems by living by the adage: Spend less than you earn and save/invest the difference, says Khumalo.
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