Sanlam's One Rand Family gets a new perspective of their budget

This episode opens on the family confronting the reality of their financial situation in stacks of coins. After rallying together to count out their July salaries - paid completely in R1 coins - they see their household budget like never before and realise that the vast majority of their monthly earnings is going to debt.

Mother Londi says they felt like 'the mafia or tenderpreneurs' making all their major payments with suitcases full of coins. And what is left is a relatively small amount for all remaining expenses, including the nanny, petrol, rates, taxes, hair, nails, water, lights - and an obligatory trip to Durban to negotiate labola for father Sbu's sister. It will be interesting to see if they sacrifice any of their usual luxury purchases this month - without the usual credit card overdraft to back them up.

Typical family

Financial journalist Maya Fisher-French says the One Rand Family is extremely typical of the average South African family. "There is more money going out each month than coming in."

So far two big issues have stood out for the family - their credit card bill, and ratio of car payments to pension savings.

Firstly they are very unhappy with their credit card bill. They estimate that they owe around R50,000 on their credit cards. They pay the minimum of R2,000 each month of which R500 goes towards servicing the interest on the bill. And while not all debt is bad, debt for appreciating assets such as houses is considered 'good' debt, the family's 'bad' debt (debt for necessary but depreciating items such as cars which should be kept as low as possible) and 'ugly' debt (buying things you can't afford and don't really need, on credit), are high.

Paying with plastic

Rafiq Lockhat, a clinical psychologist, says it is natural for the family to see their finances in a completely new light now they are dealing with their money physically. "When paying with plastic, we don't really feel our spending. What you can't see, you don't feel. The system is sneakily designed that way." Lugging suitcases full of R1 coins to pay everything from the bond to the cellphone bill is a very different way of experiencing money.

The second big issue, in dad Sbu's eyes, are the small amounts spent on pension versus the high amounts on cars. He believes it should be swopped with far more being allocated to their retirement. But wife Londi differs, as she believes she has plenty of time to save for retirement. "I have at least 25 years left to work; this is plenty of time to make a lot of money. We work really hard and we deserve to spoil ourselves."

Lockhat says on paper there is nothing wrong with Londi's way of thinking except that it doesn't take into account what may happen tomorrow, next week or the week after. 25 years is a very long time.

Investment economist at Sanlam, Arthur Kamp agrees. "We shouldn't use the age old saying of 'tomorrow never comes' because before you know it, tomorrow is here. By not establishing proper savings habits you are foregoing the opportunity to make your money work for you."

For more, go to onerandfamily.sanlam.co.za