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How are you getting on with drawing up your budget and keeping track of expenses? I have an excel file on my computer named “My money”. It now runs from July 2014 till this month! (Before 2014 we didn’t have cloud storage, so those files are lost.) Get into the habit now, and it will serve you for the rest of your life. Remember: avoid short-term disaster and build long-term success.
Last week we ended on a reference to debt. Let’s pick that up.
Often in life we need or want things for which we don’t have the money. One option is to borrow, to go into debt. It solves the immediate problem, but it may make it worse in the long run. Handle with care.
Not all debt is bad. A student loan, for example, is an investment in your future. Your education is the foundation on which you will build your career, which will give you a return on that investment. A car loan may enable you to earn an income. A house loan may be cheaper than paying rent. BUT: every loan costs money. On a student loan, you will have to pay interest and fees every month while studying. When you finish your studies, you have to pay back the capital as well as interest. Be very clear what you are signing up for. All South Africa’s major banks have clear information, with examples, on their websites. Do your homework before making a decision.
Making debt for immediate expenses, however, is the road to disaster. Take for example a clothing account. Not only will you have to pay interest, but you will pay a monthly fee simply for having the account, which varies between R15 and R68 (this website has great information on all of this), and in many cases you will pay an “initiation fee” when you open the account. Clothes to the value of R1000 can cost almost a third more by the time you have paid it off six months later.
If you can’t keep up the payments, you may soon find yourself with a bad credit score, making it very hard to get a loan for a car or a house in future.
And by the time the loan is paid off, the clothes have lost their shine already. It’s not worth it.
Many shops have a lay-by system, where you pay a small amount upfront and pay what you can every month until the item is paid off (interest-free) and you can take it home. That’s a good idea, but it’s even better to open a savings account, separate from your day-to-day account, and save the money for yourself. That way you will earn some interest, even if the amounts are small. If you manage to start saving now, or even just put your emergency money in there, you will be astonished to see how much interest you can actually earn.
The bottom line is: stay away from short-term debt. It’s expensive, and it becomes a trap.
An even bigger trap is gambling, especially online gambling. DO NOT EVEN THINK ABOUT IT. Do not for one moment believe the advertising promises of “easy wins”. Gross Gambling Revenue (GGR), which is the money operators keep after paying out winnings, was R75 billion in the financial year 2024/25, representing a year-on-year rise of 26%. They make money because you lose it.
Furthermore, gambling is more addictive than drugs, because it’s always available. It’s on your phone, 24 hours of every day. 31% of active gamblers struggle with a loss of control over their gambling behaviour . That means that three out of ten people who start, get hooked. Almost 2000 young adults between 18 and 35 called the Responsible Gambling Foundation’s helpline in fy 2024/25. They seek help for financial problems, legal problems, and alcohol abuse – a destructive, interwoven spiral that can ruin your life before you’ve started it.
For more information, read this article by Daily Maverick. Starting to gamble is to play with fire on very thin ice. Do not do it. And let us repeat it: do not believe the advertising about easy money. Betting companies exist to make money. Your money.
Next week we’ll try and convince you to move to the other end of the responsibility scale and start to save now, immediately, even a small amount. Ever met Winnie the Pooh and Pooh Bear? Saving is a Very Good Idea.
Happy studying and be careful with your money!
The GRAD team
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GRAD – your guide to university success is a partnership project of Ruda Landman, StudyTrust, Van Schaik Publishers and Capitec Bank.