Manage your ego, to reduce your debt

Wealth and ego are intertwined. From the first moment early civilisations started trading with each other, possessions became a symbol of what sets us apart. Back in the day, a neighbour might envy you as you pulled out your rare ivory-handled knife or marvel at your beautiful wolf skin coat that you’d bought from some faraway land. It didn’t matter that a deerskin coat would keep you as warm, it was the distinctiveness of the coat that set you apart and marked you as someone special.

Today, we still put a disproportionate amount of value on possessions. The difference is, back in the day, it was rarity and exclusivity that was valued whereas modern treasures seem to be, to a large degree, coveted for their popularity. No one sane would suggest that the latest iPhone, for example, is unique or rare. After all, in 2016, 211.88 million iPhones were sold worldwide, adding to the estimated 700 million iPhones that were already in use. Instead of setting us apart, the majority of our daily possessions today serve the purpose of making us feel that we belong. And this belonging comes at a cost.

Talk isn’t always cheap

Let’s start with the mobile phone. In our connected world, there’s no doubt that it is a necessity. You can even make a credible argument that a smartphone is a necessity. But is the difference between a Huawei P8 Lite at R2 700 and a Samsung Galaxy S8 at R13 000 really so significant? And do you really need to get a new phone when the latest model comes out? Sure, the latest gadget, a new car or an expensive watch can give you hours of pleasure as you demonstrate to your admiring friends all the incredible features that it has, but all of these are simply ways to feed the ego and prove to yourself and the world that you are doing okay. Don’t get us wrong, we love new shiny toys as much as the next guy, but they devour money like Pacman at a Pac-Dot buffet.

Steals on wheels

After our homes, a car is the most expensive item that many of us will ever buy. With entry-level models averaging R130 000 and luxury vehicles reaching way past the R1 million mark, you’d think that South Africans would be a little more conservative when considering their next vehicle purchase. But cars are the ultimate status symbol and emotion, not logic, tends to guide our decision–making. A car is about the worst investment you can make. In fact, it’s not really an investment as it’s guaranteed to decline in value. Imagine if you bought stock in a company that you knew would depreciate. Wouldn’t that be silly? But cars are bought because they reflect who we are (or want to be), not because they get us from A to B. They tell the world that we’re rich and powerful, or young and adventurous, or sporty and sassy. If there is anything that could physically manifest as our ego, it would be that four-wheeled money pit in your garage.

The harsh reality

Our egos are expensive to maintain and our credit records are paying the price. According to Debt Rescue, quoted in a 2016 article on BusinessTech.co.za, more than half of all consumers owe 75% or more of their income to creditors. The same source stated that Debt Rescue’s overall growth in indebted consumers who sought relief by going under debt counselling now tops 40% year-on-year.

So what’s to be done? How do you avoid the trap of letting your ego write the cheques?

Start by being honest with yourself. Are you honestly buying that new car because it’ll save you money in the long term? You may cling to arguments like “my old car’s service plan has run out” or “I want to get a good trade-in on it while it’s still young”, but isn’t the truth, really, that you simply like new, shiny things? And, can you afford that new game or new fitness watch or are you just shuffling money around so that you can pay for it now while having to sacrifice something more important in the future? According to the National Credit Regulator, almost 10 million South Africans are battling with over-indebtedness. As long as we keep letting our ego call the shots, we’re going to keep buying things we don’t need and getting ourselves further into debt.