Of plastic money and reckless spending

Martin Kadzere Personal Economy
ZIMBABWEANS have now embraced the use of plastic money and mobile payment platforms since the economy started going through serious cash shortages early last year. Not so long ago, Zimbabwe was largely a cash economy with the use of plastic money often viewed as a preserve for the wealthy. After the economy started experiencing cash shortages, many people were gradually forced to use alternative payment platforms. Businesses responded by introducing points of sale and accepting payments via mobile platforms such as EcoCash.

Even some businesses that operate in smaller markets such as some rural communities have embraced plastic money by introducing POS machines though the penetration rate is relatively low.

Various urban entertainment centres, fashion shops and a few informal traders are moving on with time and have acquired point of sales machines to enhance sales. The potential for growth of plastic money and online payments is significantly higher.

Undeniably, the shift from using physical cash to plastic money has brought convenience into people’s lives. However, this has resulted in many people unconsciously spending more than those transacting with cash and this often leads to bankruptcy and financial stress.

More so, people tend not to be worried about prices when paying using plastic money. Some researches on psychological impetus behind impulse spending have shown than spending using plastic money is one of the main reasons people tend to overspend.

This is because there is no emotional pain that a person normally experiences when using hard cash. Plastic money often doesn’t feel like real money, observed Brad Klontz, founder of Financial Psychology Institute of Island.

“A card distances us from the fact that we are spending,” he says.

“We are not laying 20 dollar bills on the counter, so it is easier to spend freely.”

So the use of plastic money tends to breed financial indiscipline, often times unknowingly.

The mere fact that one is not holding physical cash can influence irresponsible spending.

It can be very difficult to make a sensible budget with electronic money than cash at hand as plastic money has a feel good factor that fuels an inordinate amount of unplanned buying.

The point I am making here is try to avoid the pitfalls associated with using plastic money.

Plastic money is a relatively new phenomenon for Zimbabwean consumers. Due to its convenience, there is natural tendency to spend in excess of budget amounts. This applies in particular to entertainment and consumptive expenditure. As such it is important for consumers to check their accounts balance after transactions to keep expenditure in budget.

It is also advisable to separate savings accounts from current accounts as an additional control measure.

However, as consumers get used to plastic money and online commerce, levels of financial discipline are expected to improve.

To avoid falling into the temptation of overspending, it is critical to identify those temptation before spending.