Know Your Money with Bronwyn Waner and Craig Finch
Welcome to Know your money, where we will explore our relationship with money and how the psychology of it impacts our financial decisions as everyone thinks about money differently. In our podcasts we will be presenting a variety of financial topics in an easy-to-understand way which, we hope, will assist you with managing your money.Please subscribe to our podcast or have a look at our website www.growthfp.co.za
A flawless spreadsheet can be the fastest way to do nothing. We talk through Morgan Housel’s “reasonable versus rational” idea from The Psychology of Money and why a plan that helps you sleep at night often beats a plan that looks perfect on paper.
From a South African financial planning lens, we unpack what happens when the numbers don’t match your real life. Think of the young professional or student trying to afford medical aid, income protection, possible life cover, and retirement savings while earning a starter salary. When the “correct” answer eats most of your pay cheque, the real skill becomes prioritising, placing smaller bricks first, and mapping out what you will add as your income grows.
We also zoom out to retirement planning and lifestyle choices. Many people assume their current costs will stay the same forever, but life changes and so can spending. Holidays are a great example: an overseas trip every year might be irrational for your budget, but a local South African break can still be a meaningful, affordable goal. The key takeaway is simple: keep the spreadsheet, but treat it as your North Star, not your bible, and come back to it after every season-changing event like buying a home, getting married, or having children.
Subscribe for more practical money conversations, share this with someone who feels stuck, and please leave a review. What part of your money plan feels unrealistic right now?
Hello, everybody. We are back today on Morgan Housel's book again, The Psychology of Money, chapter 11. And this chapter is about reasonable and rational. He works through a lot of different examples, but I thought what we can do today is more work through an example in financial planning. Because one of the things in the in the book, he says, you're not a spreadsheet, you're a person. And there's a mathematic strategy versus a sleep at well strategy, you know, the rational and the reasonable. And in financial planning, I think so many times we go sit in front of our clients and we are showing them the math spreadsheet, you know, the rational one. This is how much life cover you should have. This is how much you should be saving towards retirement. If you want these 15 goals, this is what you need to do. I I don't have very many clients that are doing all of them.
And it will take time to cover each of them. So yeah, no, definitely not.
SPEAKER_01
Yes, I mean you sit with a student, for example, okay, that student needs to have medical aid. They definitely should have income protection, maybe life cover if they have some young children and saving towards retirement. The next moment you look, that's 7,000 rand a month, proper medical aid, all of those things. They're often earning 10,000 rand. How are you supposed to do that? And and I think we get so caught up in the rational that then some people get paralysis and don't do anything. And I think that's where you've also said, like, what's most important is what is actually reasonable for you. So let's say there is this young student who's now starting out. That person needs to think through what is a reasonable amount that they can afford to spend on all these different versions, and that's where the financial planner would put little bits in all the different areas, right?
SPEAKER_02
And also when you build that wall, it's a brick at a time. So you might not be able to put money in all those areas. You might prioritize one or two, but you know that the wall won't be built with one or two. You need to add bricks to that wall. So next year and the years to come, you've got a plan, you know, where you the next portion of money will be allocated.
SPEAKER_01
100%. And I also think what happens is when we are doing retirement planning, for
example, we're often sitting with a person that has a bond, has two kids in school, is paying off a car, so you go, okay, I need 35,000 rand a month, you know, because that's the version of you that's sitting there right now that needs those expenses. And then you sometimes focus on, okay, well, if I'm in retirement, I would need the same. But maybe you don't. And how do you plot what your reasonable life looks like? What would you say to someone that's retiring? How to look at it in a rational way and a reasonable way when it comes to the planning.
SPEAKER_02
But if you plan it, and so you plan your holidays within your attirement as well, and maybe your some you so you yeah, you just need a proper back to the spreadsheet, you need to look at a spreadsheet. What do I need in these areas? And do I need a uh overseas holiday every year? No, probably not. In fact, so can I have a holiday in South Africa in a resort and I can take a self-catering scenario? Yes, I can. So that'll be a lot, a lot less to worry about. So your initial plan might have had an international trip every year or every two years, and that's irrational. It's not it's not possible. It's it it's beyond what you can afford. And then you might be paralyzed. Oh, I can't go on holiday. No, you can go on other holidays. So you need to look at how else you can fit the cloth, you know, to suit whatever you can afford in the future.
SPEAKER_01
And that's the thing, and that's where I think the the teething process should be so important, is like getting into that sort of detail. Because maybe right now what you are doing is going on an overseas holiday every single year because your kids are young and it's you know that's that's the life that you're living. But at that stage, it might not be that same life. Yes, things might change, but I think it's just about really trying to spend the time figuring out what is reasonable for you. And I know when I do financial planning, and I think it's the same with you, we often try and start at having a conversation of what is your budget?
We'll we'll explain the different versions of you. So the one that needs medical aid, the one that needs life insurance, retirement savings, and then you almost go, okay, what's a reasonable amount that you can put towards those goals? And then it's about putting those puzzle pieces together. Okay, well, yeah, we can do this one, we can do that one a little bit, maybe you start doing this one a little bit in your bank accounts, and just plotting reality versus what the spreadsheet says, yeah.
SPEAKER_02
Yes. Because that can be really daunting.
SPEAKER_01
And the goal is to get to the spreadsheet, but it's not always achievable straight away. It takes testing, it takes adjusting, it takes looking at your budget, your this, you're that, earning more, um, really trying to figure it out. But I think the essence is you should have a spreadsheet, but it shouldn't be your Bible, it should be your North Star in a way, of where you're trying to get to. But understand that you don't win a Wimbledon by playing just one match in Wimbledon. You've got to win, you've got to lose, you've got to enter all these other different competitions until you get there, right?
SPEAKER_02
And also you need to keep looking at it. It's no good say, well, I've done the spreadsheet once, I never have to do again. You've got to go back to it. Does it apply to me now? No, it may not apply to me now. Do and how how how is it going to change over time? Okay, now I have got a salary increase, I have got a bit more money, so that one puzzle I couldn't piece I couldn't get to, I can get to it now because there's a plan. So you've got to have the this master plan that you go back to for ultimately getting to the endpoint, which may be in decades time. I think what you always think, oh my word, I'll never get there, but boy, it comes quickly. You know, decades come quickly. It's just incredible how quickly it is. I mean, I can't believe that I've 40 years later now. I mean, 40 years ago I thought, gee, that's so long. But now you can feel like I was 20. But now it's 40 years ago. Well, I don't feel like I'm 20 when I get out of bed, but I mean No, but you've got to go back to the plan. I mean, the back, as you say, the North Star, the master plan, and you've got to have your guide with you and making sure that you bounce ideas off and see where how how does the plan look, how's it evolving, how's it changed, and it does change. It's not what you think it is from the beginning, it does change over time. But pay attention to it, that's what I say. It's important. Because often we think, oh, money, and it's so bit embarrassing. And oh my word, I'm not doing what I should have done. The plan that was put out to me all those many years ago, I'm not quite there. No, you're never gonna probably be there in every aspect. You can't say you're gonna be.
SPEAKER_01
It's like the wheel of life. You they're not all gonna be 10 out of 10, right?
SPEAKER_02
But try hard to get, try harder, that's what I'm saying. Yeah.
SPEAKER_01
Yes, and I think the biggest thing is that there is that adjusting, you know. So for example, you might be on hospital plan now because you don't have kids, you're not doing anything. The moment you have kids, you're gonna have to shuffle that around. You're gonna have to upgrade to a higher one because now you have children. Then something else would have to take maybe a back burner. But it's understanding how you want to balance that and which areas you can. It doesn't always need to be um spend, you know, spend less. It could be earn more so that nothing has to change. It's really looking at the wheel of life and wheel
of wealth that we've created each year, even every quarter. You know, there's in financial planning, there's those big moments where you should reach out to a financial planner. If you buy a home, if you get married, if you have children. Those are season-changing events that that creates that plan to change.
SPEAKER_02
Definitely.
SPEAKER_01
And then you'll get the new plan. You never have kids. Now you're gonna see how much life cover you are supposed to have. Looking at that in the rational on the spreadsheet only is scary, but you can look after that in some essence by doing that balancing act.
SPEAKER_02
Very important, yeah. Good.
SPEAKER_01
Awesome.
SPEAKER_02
Thanks, Brian.
SPEAKER_01
Thanks so much.
SPEAKER_02
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.
