174. How Life Experience Shapes Your Financial Choices

The most frustrating money argument is the one where both people are “right”. We dig into a core idea from Morgan Housel’s The Psychology of Money: no one is crazy, we all make decisions based on the tiny slice of the world we have personally lived through. That slice might be small, but it shapes our spending, saving, investing, and risk choices more than any spreadsheet ever will.

We get practical with real-world financial planning examples. Bronwyn shares a scary medical aid moment that instantly changes how you think about premiums, private healthcare costs, and what “risk” feels like when it is no longer theoretical. Then we move into retirement planning and how one defined benefit story can set a family’s beliefs for decades, whether that story ends in security or disappointment. We also unpack why people judge lotto tickets, and why that judgement often misses the emotional truth behind the purchase.

Along the way we connect the dots to South African saving and investing tools like retirement annuities and tax-free savings accounts, and why these relatively modern vehicles still need time and behaviour change to work. If you want a clearer lens on money psychology, compounding, and building a plan that can handle both luck and bad luck, press play. Subscribe, share with a friend, and leave a review so more South Africans can learn to know their money.

Transcript

Welcome And What We Are Reading

SPEAKER_01 0:12

Hello everybody. Welcome to Know Your Money. I'm Bronwyn Wayner.

SPEAKER_00 0:16

And I'm Craig Finch, and we are from Growth Financial Planning. We hope you enjoy our podcast. Hi Bron. Nice to see you again.

SPEAKER_02 0:24

Nice to see you too.

SPEAKER_00 0:26

And I see you got a book on the table. What's that book all about? Looks like we're going to discuss it.

SPEAKER_02 0:31

Absolutely. So this book is The Psychology of Money.

SPEAKER_00 0:35

Aha.

No One Is Crazy About Money

SPEAKER_02 0:51

So we sat and said, why don't we go through each of these episodes, uh, each of these chapters and do a bit of an episode on each of them because they all have these different messages, and I still encourage you to get the book and read it because you know what we're gonna talk about is a little part of what's actually valuable in the book. Um, so yeah.

SPEAKER_00 1:15

Should we start on chapter one?

SPEAKER_02 1:17

Let's do that. So chapter one is that no one is crazy. Okay. And the first line.

SPEAKER_00 1:26

You disagree with that.

Medical Aid Shock And Real Risk

SPEAKER_02 1:27

You disagree with that. The first line in the book is your personal experience with money makes up maybe 0,0001% of what's happening in the world, but maybe 80% of how you think the world works. And what he basically talks about in this book is that we all come from different generations, different perspectives, different eras, or you know, your someone's parents might have come from the war and money was scarce, and then that sort of scarcity mindset follows through you because you have a certain lens or view of the world and money. And one of the biggest things that he says is you can read about something, but unless you've lived through it, it's hard to change your behavior. So you can read about putting money away in an investment, but if your behavior is not to do that, it would be difficult. So I think an example that's quite real and tangible in our industry is medical aid. And don't you have a personal experience of paying your medical aid premium?

SPEAKER_00 2:47

For years and years and years.

SPEAKER_02 2:49

And then?

SPEAKER_00 2:50

Then I needed it. And yeah, that was quite an experience because when I was in the doctor's rooms thinking it's a little thing that's wrong with me, and I'm sure one tablet will sort it out. Suddenly it was, oh no, no, you're going straight to ICU. I went, what? Then they they wheel you out the rooms, past the admission area, that reception area, and they stop there. And you're lying in this bed and they stop it. And they first check if you're if you are on a medical aid, that will cover this procedure. And if it's not, they're gonna just do a U-turn and wheel you out of the door and you're on your own. And that was quite a scary experience. I just felt my stomach turn, and I thought, I hope my medical aid will cover this, because I'm sure going into an ICU environment and it's gonna cost a lot of money. Thank goodness they wheeled me straight past after signing a piece of paper, and I was into the best care that I could be part of, which was amazing. So I was really very, very lucky that I was in that situation and they saved my life. But if I didn't have a medical aid that could do that, and yes, you're right, for 40 years, why am I paying this medical aid? You know, in the back of your mind, I've never needed it, so I've been healthy all my life. And all the premiums that I paid there, I mean, what could I bought with all those premiums? But until it happens, then you realise, my goodness, thank goodness I had it. So you're absolutely right.

SPEAKER_02 4:22

And even that bill now probably is more than all those premiums you've paid over your life. That medical aid bill. And I mean, that one episode where we had Calvin on who went into those power lines and his medical aid bill was in the millions.

SPEAKER_00 4:38

Yeah, 400 days in hospital.

SPEAKER_02 4:40

And it's these sort of things where we have these crazy moments where we think, okay, well, medical aid's not that important because I haven't needed it. And again, it goes to that experience. So if you have a line of family that's never really needed to go into hospital, you're gonna say, what's the point of having medical aid? And everyone has their own lens and their own view and perspective of the world. But I think the most important thing is to try expand that view. And that's what this chapter does a lot of. I think it helps you expand your perspective.

SPEAKER_00 5:20

Especially also on savings as well. You start, people, as you say, people tell you, listen, grandpa saved all his life, or he worked at a company all his life and he was able to retire. So when you start working, you must save every month, and you go, you're right. I mean, oh no, grandpa's so old. I mean, that's a long time to go. I don't have to worry about it now. And you don't do anything about it. So it's back to starting somewhere, putting money away, as one example of how your reality might be different to what you think is the reality.

Retirement Stories That Shape Beliefs

SPEAKER_02 5:53

Absolutely. And another example of that, so my gran, her dad worked at um some company for his whole life, and then he went on to retirement, but it was the Defined Benefit. Defined benefits. So what that basically means is he as he went on to retirement, they said, okay, we're gonna give you this much for the rest of your life, and you'll be okay. He literally died a year later, and my grand and her sister got nothing. So he had this defined benefit that would pay for the rest of his lifetime, but then his lifetime was one year. And that had a ripple effect on our family, because my grand was like, I don't believe in retirement savings. Yes, but it's because of that form of retirement savings, and then that ripples down to other generations, and I think it's just about that awareness of trying to see different perspectives, which isn't always easy, right?

SPEAKER_00 6:56

No, exactly. And as you say, you've got to experience it, and the it might be a good or bad experience. So, my experience with that is my late father-in-law. He was on that same kind of fund defined benefit. He r he retired at age 65, and he passed away at 97. Sure.

SPEAKER_02 7:15

So he got the benefit of that one.

SPEAKER_00 7:17

And in fact, my mother-in-law is still alive, and it's two years ago when he passed, and she's still getting a portion of it because it's outworked. She got 60% of his last salary. So I mean, they I mean that fund has been paid for well over 30 years, a pension to that to that family, which is incredible.

Lotto Tickets And Judgement

SPEAKER_02 7:36

So And I think that aligns with one of the other chapters that we'll go into where it's like um luck and risk. And you you there is the one person on the one side and there is the person on the other side, but you never know which side you're gonna be on, and it's just trying to prepare for that. Another thing that he also just mentions in the book about no one's being crazy. You know, a lot of people judge the the poor for buying lotto tickets, whereas the wealthy don't necessarily go and buy so many lotto tickets. But for them, that lotto ticket is this is my only chance at being wealthy in their mind. So they go and buy those lotto tickets and they link it to this dream of this life. And it's not to say that they're crazy or wrong, because maybe one of them will get that. But other people on the other end are like, why would you do something like that? And it's just understanding that if you rather took that 50 Rand a month that you're putting in the lotter ticket and you put it to something else, that can totally compound and be those millions later down the line.

SPEAKER_00 8:50

Correct.

Compounding Needs Time And Attention

SPEAKER_02 8:50

But how do you change perspective? Have you had an experience of helping someone shift their perspective on anything?

South African Saving Tools And Wrap

SPEAKER_00 8:57

I've just seen people that have stayed on a pension fund for that they they've worked at a company for many years and they stayed on the fund for the 40 years, and how they were so surprised as the years got closer to retirement on what kind of money was in the fund. Because all the way through they don't really know what was going into the fund, they just knew they had this pension fund. And luckily they had done the the few that I have had experience with, they've done the long yards, but the other uh disappointing ones are the ones that work the last, say, 15 years of their life at a pension. At a company there is a pension or a provident fund, it's only 15 years of compounding and putting money away, which is never enough. And they haven't looked at their finances and they thought, oh, I'm on this pension fund, I'll be okay. Not understanding the that compound interest has a time factor, which is the most important part of it. So it's it is difficult. But there are clients who are take your advice and they go from the beginning, from when they started working. And I've I've got clients that have worked with me 40 years, and they they say thank you to me for what I did. And I'm saying, no, no, no, thank you to you for coming, for listening to what I said and doing doing it together over this 40-year period. And that's that's very rewarding when when you look back at the advice, and the advice was taken and it's it's shown bears fruit in the end.

SPEAKER_02 10:23

Absolutely, and I think just the last part on this is even just that concept of retirement. In the book, Morgan Housel says, you know, retirement annuities started in South Africa in the 1960s. Our tax-free savings account started in 2015. So there are these amazing vehicles that are trying to help us, but they are still very new. So a lot of people aren't great at retirement savings because they haven't experienced that. But the generations that they are now having that have had retirement annuities in their whole life, those are the ones that should be jumping on that and and maximizing it. And we are all human, we've got to learn these new ways. And I think it's just about that opening up your awareness and perspective to these new ways.

SPEAKER_00 11:17

Look forward to the next chapter. Awesome. Thanks, Braun.

SPEAKER_02 11:20

Thanks.

SPEAKER_00 11:21

Bye. Thank you for listening. If you have enjoyed this podcast, would like to subscribe, please visit our website www.growthfp.co.za. The information we have provided in this podcast is our personal opinion. For more detailed information, please discuss your financial situation with a financial planner.