Finance for the masses

My goal is to become debt free and obligation free financially. So far so good. Here are some rules of thumb that im following

Avoid contracts
Cellular providers typically offer 2 year contracts. They will give you a brand new phone every two years if you just stick with them, but don't think for a second that this is a good thing. I have a top up R250 airtime per month contract. I can increase this amount but I cant decrease it. If prices come down and i dont call that much anymore I will lose money and be forced to make calls. But all is well because my contract is expiring, which means i can switch to a lower option or go to a new provider if there is a better price offered somewhere. But of course the bastards phoned me reminding me that I can upgrade... NO THANKS!! JUST SAY NO! Gym contracts can even be worse considering many people get gym contracts thinking that because they pay they will go. This is not true. I am convinced that gyms make the most money off of people that don't even go there.

Banks are your enemy
A week before my cellular provider phoned me my bank phoned me. I am saving up for my holiday and have quite a bit of cash in my account. Now they want it. Banks are not your friend. They will advertise people running in fields with butterflies but the truth is that they want your money, and they want you to be a slave to their debts. When you see that banker driving around in an aston martin, think about how you are paying for it by being stupid and using a credit card.

Pay off your car
Your car debt is the worst debt, because while you are having this debt it is near impossible to have any investment that can recouperate the lost amount of money on interest. If you pay more on your car loan some of that interest will be refunded to you. This is better than any investment you can make during your loan period. The worst part is that your car is depreciating at such a phenominal rate that you can never get that money back. The bank will tell you that you can skip payments of get balloon payments for lower installments. Dont fall for it, just pay it off. Cheaper cars are also good. In my opinion the most luxurious car is a 2.0 liter with aircon and leather seats, if your paying for anything more you are wasting your money.

Make sure your investments beat inflation
This one is simple. Inflation is 6.5%, your savings account gets you 5% interest. Even if you save money you are losing money. Keep this in mind when you invest money and remember that if you still have credit card debt and car debt your investments are a dead loss because your money is being sucked out of you by debt.

Control risk factors.
Alot of people think they can bareback life by not having insurance or having meager insurance. Get decent insurance coverage for health and your assets. Make sure you have a nest egg to pay your excesses as well. Some may think that self insurance is an option. Let me give an example of why this is not a good idea. Sure you can save enough money to buy a new car if your car is written off or stolen, but bad things sometimes happen in threes. So you buy your new car and wham you write it off on the first tree. With insurance your risks are covered at a cost, but it is one that is certainly worth it.

Don't let marketing get you
Many of us get spammed with messages telling us that you can now get something for much cheaper. The only problem with this is that specials have a place in any business. For instance I can have a special on razor blades in my supermarket and then push up the price of bread and milk at the same time. The consumer thinks they are saving but they end up walking out with a full trolley of groceries and what's worse they are under the illusion that they saved money so they buy more.

Compare prices and products
Shops are like candy stores. Candy is colourful, you walk into a candy store and shovel up the stuff that looks yummy. Electronics shops are the same thing. They will have beautiful televisions and cameras and whatever you want, but on their terms. People buy things just like that, and I have made this mistake before. Go online and search for the thing you want or need. Then compare specifications versus price and look at reviews. Reviews will often tell you how good the quality is of something. Bang for you buck is usually what im looking for. You can even do something crazy like say: search google for "hd tv" "bang for your buck". These are products that somehow are good quality and are pretty cheap too. When youve found the product you want look for the place with the best price and service. So when you find the item for the cheapest price then try to find reviews for the seller. If the seller has bad reviews go up to the next cheapest one, until you find the right price from the right place.

Pay cash and ask for discount!
Stores allow for credit but they are very happy when you fork out a wad of cash and pay on the spot. EFT with online stores is a good idea(since its more secure than credit cards). If you are paying cash and there is no cash price for something ask for discount. If the item is very expensive and you have a larger wad of cash they will be more willing to give discount.

Think before you buy!
When you initially want something there is a rush of goodiness you feel and the happiness with having the item. Allow a few days to pass and then really really think about. How about the lower end model? Will you really use that feature all the time? I know that mercs will turn their headlights as you take a corner but honestly I have never had a problem with my hyundai going around corners at night. Also remember that those cars always tend to go around mountain passes which most of us don't go around too often.

Don't buy that software!
Buying software can be smart if your using it every day. It can make your life more productive. But consider open source alternatives. This software is free and even though in many cases it may not have all the fancy features it often does the job very well. There is a site where you can check open source alternatives: www.osalt.com

Don't turn needs into wants
When you need something like a new cellphone don't go and buy the most expensive one you can find. Instead justfy every single feature of every single one you consider. For starters think about how you use the phone you have. Cell phones with GPS are pointless, because teh screens are mostly too small to help you navigate in your car. Whats worse is that a normal cell phone and a GPS is cheaper. Cell phone cameras are also terrible, so dont think your buying a camera. Your family photos wont look so good because of the limits of miniturisation of phone cameras. Consider buying a digital camera.


Don't buy cheap

You can go to a cheap clothing store and buy your entire wardrobe for next to nothing. Cheap clothing does not generally look good because somehow the fabric is cut and sown awkwardly. The colours will fade quickly and youll find yourself replacing it very quickly.

Buy the right price stuff
There are three groups of consumers. Those with too little money, those with enough money and those with too much money. Those with little buy cheap stuff thats unreliable and fails them. But they need it now and maybe is not so bad if their break light dangles from the bumper when they are struggling to feed themselves. Rich folks buy things that are exclusive. Please note that these things don't actually reflect quality. There is very little difference between R200 whiskey and R2000 whiskey, and the difference is largely psychosomatic denial on the part of those that buy the expensive stuff. People who have enough money and are serious buyers create a market for quality goods at reasonable prices. Dont try to be rich, its disappointing. Once I had a R600 bottle of champagne just for the heck of it. I realised afterward that an R80 bottle tastes better to me, and that the R600 one tastes much closer to a R30 bottle.

Vote with your money
If you are going to a store and their prices are ridiculous, don't buy there. Walk out. If everyone thinks this way then prices will come down. The truth is that business try to charge the maximum and the sad reality is that people like paying that much, so the shafting continues.

Conclusion
I hope that these tips are useful to someone, although I doubt that anyone reads this blog. I still like writing it though :)
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