Ten things they don't tell you when you open your first bank account

Most of us only begin to understand the fundamentals of money management once we wake up somewhere between the age of 18 and 25, three months into our first job, with our new rented flat all kitted out, firmly in debt and beginning a lifelong struggle to get out of it. Here are a few very basic personal money management tips that helped me when I was starting out.

1. The amount of money you have is the balance in your cheque account, less the cheques you have written out that month that haven't been processed yet, less what you have spent on your credit card, less all the instalments you owe, less the cash you'll need for day to day expenses. A good practice is to use electronic banking where the transaction is immediate, rather than writing out cheques.

2. Credit cards are great friends when used properly and terrible enemies when they're abused. It is sensible to pay the full balance owing on your credit card every month plus whatever else you've spent. Try to spend only what you know you can pay for in that same month.

3. Buying on credit means you're buying something you can't afford now with next month's money. It just turns into vicious circle. Only extend yourself on credit cards for absolute essentials. The new flat screen TV should wait until you can afford it.

4. Once you've bought your first house try to pay at least 5-10% more on your bond than you have to each month. You'll not only pay off your house in half the time, but you'll give yourself a gap if some unforeseen expense takes you by surprise and you need to pay a smaller amount for a month.

5. Don't sign sureties. A surety ensures that the person who signs it pays when the person they sign it for goes under. Why on earth would you want to sign something like that? The person that wants the surety is simply transferring ALL the risk to the person who signs it! Remember that often in life we get conned into thinking we don't have a choice. Wrong, my friend. You almost always have a choice.

6. Don't be fooled by the current "low interest rates." Low my foot. We're still substantially higher than our top overseas trading partners, and it is only a matter of time before interest rates bottom out and go back up again. What goes up must come down, but what comes down is bound to go up sooner or later. History has shown this time and time again.

7. Cars are not investments, they are appreciating liabilities (or depreciating non-assets). In other words, it's the liability that usually appreciates. The best car to have is one that's paid for, no matter what your accountant says.

8. Houses are only good investments when you buy them near the bottom of the market. People have short memories. Twenty years ago you could buy a 3 bed roomed townhouse in Sandton for R130,000. Two years later you couldn't get R95,000 for it. We are not far from the top of the longest bull run in the property market in 50 years. Beware the feeding frenzy.

9. Keep only enough money in your savings account for liquidity purposes, especially with interest rates having declined recently. You will get a far better rate of return by putting your extra savings straight into your bond.

10. If you win the lotto, I'll pray for you. You'll need my prayers because it will more than likely ruin you. Do the following. Put it away in fixed deposit for six months and get counselling - fast.

Finally, the importance of anything in life is proportionate to the degree to which you don't have it or aren't getting it.

Paul du Toit (November 2003)