We’d love to believe that as we get older and take on more responsibilities, we’d become a little wiser with our fiscal management. So many of us are still guilty of allowing hard-earned dollars to seep away by various means, and they all add up. Oh boy, do they add up!
Let’s take a look at common money beliefs and practices that may actually be putting a huge dent in our savings tin.
Take your money from under the mattress and put it in a bank
Ok, you really should stop hiding money under your mattress…or in the cupboard, or dresser, or anywhere that doesn’t earn you interest and is susceptible to rodents (we’ve heard they have a particular hankering for currency notes). Shop around and find the best institution in which to invest your money.
The idea of saving in a bank is to gain returns on your money but some bank fees and penalties can take more of your savings than you gain from interest. Add to that the low rates that they offer (one Jamaican bank gives a maximum of 1.55% and that’s only for accounts with $1 million or more) and that mattress may seem to look quite attractive. Instead, shop around for institutions that offer more and charge less. Your best bet may be to go with an organisation that is built around a membership structure rather than just the cold, harsh business-customer dynamic. After all, the primary aim of businesses is to make money…from their customers.
Brand new is best
There is a great deal of sound logic in this policy and, in some cases, it works. Then there are times that is doesn’t.
The logic – buy brand new, you’ll get the item in its best condition and it’ll last longer.
The counter – there are a whole host of items that you don’t have to or should NEVER buy brand new because you won’t get your money’s worth.
Let’s start with a home. Homes in Jamaica are built to last anywhere between 50 to 100 years. As with everywhere on the planet, the costs of new developments also increase with time. Buying an older property may help you save on some of the initial costs and can be beneficial if the previous owners made additions and improvements that end up saving you time and money.
Cars are another example. It is said once you drive a spanking new auto off the lot, the value goes down by as much as 9%. Of course, these figures will vary but the principle remains the same – you get more for your money when you buy a pre-owned automobile in good condition. And there are many more examples. Some items for babies such as walkers, furniture, appliances, carpets and some home fixtures are just a few more items that can be bought second-hand for better value. Throw pride out the window, you’ll be much more proud of the savings in your (fee-free) account.
Cheaper is better
This train of thought is at the other end of the spectrum of the “Brand new is best” mindset. As we mentioned earlier, some used items offer better price and/or value, but there are other items that you just shouldn’t try to skimp on.
Items that may affect your health and well-being are the first things that come to mind. If you value your back, for example, go get a good mattress (just don’t hide your money under there). We can’t stress enough the huge benefit to be derived from a good night’s sleep. Clothes and shoes can go both ways. You can get really good, durable items in a Goodwill outlet, whereas you can walk into a store, buy a brand new pair of shoes for a cheap price, and in two months you’re hunting for another pair. The trick here is to look for quality in the manufacturing, whether you’re in Goodwill or Garments ‘R’ Us. Other items, as recommended by a mother, include:
Sheets – thin isn’t in, get good thread counts.
Pots – “if yu pot nuh heavy, it nuh good”. (That’s a real quote.)
Kitchen knives and utensils – they’ll last decades if you buy right the first time.
“Pardner” is the best form of saving
We’re gonna step on some toes here but just hear us out. If you have a chronic problem trying to accumulate savings and you have trustworthy friends, a “pardner” can be a big help in developing a good saving habit. There are some serious drawbacks, however, and even if it helps initially, at some point you have to step up to something that works better for you. Let’s look at the issues. In a “pardner” there is no interest to be gained, your money isn’t available to you until it’s time for your “draw”, in some cases the “banker” has to be paid, and there’s always a matter of trust and transparency. There are better alternatives. These days you can access a compulsory savings product like iSave at VMBS that requires a mandatory monthly deposit, provides you with interest and is safe and secure.
Once you pay the minimum balance on your credit card bill, you’re fine
No, no you’re not fine. This is one of the top ways people lose money unnecessarily without even realising. If you miss that minimum balance for the due date, not only may you be charged a late fee but the bank can raise the interest rate you’re paying on amounts owed. A call to a local credit card customer support centre revealed that the rates on their credit cards actually fall within a range (in their case, 47% – 54.99%) and that the high end of this range is typically charged when a customer misses three months of payments by the due date. It will take you at least 6 months to go back down to the lower rate, provided you pay the minimum balance for all 6 months.
Even if you do pay by the due date consistently, interest is still charged on any remaining balance, which means you’re paying additional money to the bank on top of what you spent using the card. At almost 50% for Jamaican dollar accounts, that’s a massive cost to you EVERY month.
There’s probably no banking product that requires the level of discipline that a credit card does, and the best advice we can give is “don’t spend what you don’t have”. If the funds you want for a purchase aren’t available in your accounts, think twice about whether or not you really NEED to make that purchase.
Share with us in the comments, your own lessons about money management and best practices.