Are you a little behind or a little ahead?
If you live in Gauteng and grab an Americano every workday morning for about R20, ever thought how much it would cost you in 5 years?
Over 5 years, if you’re paying your daily fix with ongoing credit card debt, at R4800 a year (R20 per cup,5 cups a week with 20.1% Interest rate), it’ll cost you R13’004.45, and you might never find the means to repay the debt.
On the other hand, if that same R4800 went into a fixed deposit that paid about 7,85% a year, you’d end up with R7098.17 in the bank.
The lesson here is interest compounds. It’s because banks prefer to charge more than they pay out. And it’s mostly because we’re very aware of the short-term gain and happily ignore the long term loss.