It is a financial planning exercise I do at the beginning of every year.
I take a hard look at my expenses and ask myself if there are ways to cut back so that my salary increase does not automatically get swallowed by the inevitable rise in medical aid contributions, fuel and food costs and insurance premiums. It is a way of gradually managing my lifestyle downward in an effort to find a few additional bucks to invest or pay towards the big black hole called The Mortgage.
I try to avoid lifestyle inflation, but being a journalist and a Cheapskate present some challenges.
Firstly, a questionable decision to write articles for a living naturally suggests that you don’t understand the concept of having a life, and as far as style is concerned, well, there is not much to manage down when you wear the same pair of jeans every other day.
Secondly, there are no DSTV subscriptions to cancel or unused gym contracts to terminate. (If half an hour of Moneyweb reading doesn’t get your average heart rate above 70% of maximum, I’d like to refer you to the comment section. Or your physician.)
So after carefully examining my spreadsheet, I decided that 2017 would be the year of the mobile phone downgrade. The saving wouldn’t be that significant, but during difficult economic times, a buffalo note or two is not to be scoffed at.
Of course, working through the five stages of grief took some time.
My new phone didn’t have a facial ID feature that couldn’t recognise me and there was also the absence of the adrenalin rush that only comes with the possibility of spontaneous combustion.
I finally accepted my fate when my Cheapskate mentor told me that I could do at least one thing with my new entry-level Android phone that none of the top end smartphone users could: I could drop it without repercussions.
So I took the plunge.
It was a terrible decision. The phone and package I chose turned out to be completely unsuited to my needs.
I didn’t realise it at the time, but apparently you cannot run 105 apps on a phone with only 8GB of internal memory. So with my morning coffee, I now also get a pop-up message: Device storage full. While you can run some apps from external memory, even the 32GB SD card I installed afterwards doesn’t seem to help. I am now officially an app-uninstalling-and-cache-clearing-expert. It is the reason a popular spin class in Johannesburg starts 10 minutes late every Tuesday….
And if you wondered why the CEO of your favourite listed company suddenly aged 10 years, all I can say is that taking a publishable picture on a phone without an optical image stabiliser is harder than you think.
But these are minor issues.
Where the decision really came to bite me was on included value. I previously received 100 minutes of airtime, 100MB of data and 100 SMSes. On the new contract, I get R150 of airtime value. Looking at what I paid for some recent calls, that equates to roughly 80 minutes of airtime. That’s it. Why I didn’t see the need to do this calculation upfront, is beyond me. (To all those friends and relatives who haven’t heard from me in ten years, I really was planning to give you a call this year, but I ran out of airtime….)
So not only am I not saving any money on my cellphone contract at this point because I have to buy additional bundles every month, I am worse off in terms of value received. In Afrikaans we say: Goedkoop koop is duur koop. I believe English people call it being penny wise and pound foolish.
I often wonder why we are so wired to think in terms of money. Getting a raise. Buying something at a discount. Rands. Dollars. Investment returns. Status.
Money is a means to an end. I would argue that for most people life is not about accumulating as much money as they can, but rather about the goals money can finance. A house. Children’s education. A holiday. Retirement. Perhaps the reason we focus so much on money itself, is because the assumption is that more money can buy a bigger house, a better education, an overseas holiday, a comfortable retirement.
And sometimes it can. But the focus should not be the money. Not the two buffalo notes I didn’t manage to save when I signed up for an inappropriate cellphone contract.
It should be on the goal. In my case: What is the best value-for-money cellphone I can buy that will suit my budget and my needs (and that doesn’t offer me so much airtime that I actually have to start phoning friends and relatives)?
I would argue that blindly focusing on money – maximising it or protecting it – puts you at risk of two things. Taking too much risk for your particular circumstances or living so conservatively that you end up having to spend more money because you bought something cheap and inappropriate for your needs.
Crafting an appropriate financial plan and managing finances should start with identifying your particular goals. You are much more likely to make appropriate financial decisions when you have a clear idea about your goals and needs, the risk you are willing to take (and should reasonably be taking) and how the money you earn can get you there.
Ps. If anyone has any comments on the topic, please leave me a voice note. I promise to return your call at the end of 2018 when I should have sufficient airtime again.
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