Timing is everything
Updated: Jul 25
LIFE is unpredictable... It's evident in the outbreak of a devastating worldwide pandemic, the sudden shift in social norms and crashing global economies. We may not have control over what life throws at us, but we can control our own personal timing. The time at which we do things, matters - including the timing of salaries or wages. Statistics show that 76% of South Africans live paycheque to paycheque. Moreover, 55% of black South Africans are broke merely three days after payday.
This phenomenon of spending your pay cheque in the first week of the month is called the “payday millionaire” effect. A survey done by investment management company Portafina found that the 30-day pay cycle is a direct cause of irregular spending or the “payday millionaire” effect as demonstrated in the graph.
This begs the question: 'Why the lengthy 30-day pay cycle?'. You may be stumped to learn that before 1760, getting paid weekly was the norm. The importance of timeous payment of labour is also noted in the Bible in Deuteronomy 24:15: "Pay him his wages each day before sunset, because he is poor and is counting on it."
But this changed with the Industrial Revolution in 1760 and the birth of large manufacturing corporations. Weekly wages were replaced with monthly salaries because of the administration and time burden it posed to these companies. This move was solely beneficial to employers and not employees.
Not all pay cycles are created equal
A pay cycle is the repeat schedule a payroll department follows to pay employees for work done. There are a number of pay periods such as weekly, bi-weekly and monthly. The monthly pay cycle is by far the most popular for the majority of employers because it's cost-effective, time-saving and easiest for employers to manage.
But, the once-a-month paycheque is not great for employee budgeting. Considering the current socio-economic conditions here, South Africans will live paycheque to paycheque for generations to come. And while waiting for the next payday, they are easy prey for unscrupulous payday lenders and illegal loan sharks. Studies show that unsecured lending has quadrupled to R225 billion between 2009 and 2019.
The reality is that most people struggle to manage their cash flow and are financially stressed. Constant stress changes the chemistry in your brain, impairing its ability to make sound decisions. At the chemical level, making good financial decisions when you're struggling is like drawing up a budget at gunpoint. This creates a vicious cycle of indebtedness, causing the majority of South Africans to fall further behind and further still from realising their dreams.
It is time... LevelUp!
Here at LEVEL we have shaken up the financial services industry by disrupting the conventional 30-day pay cycle and kicking exploitative payday lenders to the curb. Our socially responsible daily money management platform builds wealth and dignity for employees through savings, and access to pay when they need it - before payday arrives.
It's easy to LevelUp! Once your employer registers on the platform you can keep track of hours worked and money earned. The platform charges a small service fee (to keep the app operational) when withdrawals are made. This has no impact on the employer’s cash flow.
Having access to money you’ve already worked for means you can afford unexpected expenses and not worry about paying exorbitant interest on dodgy payday loans.
So when life throws you a curveball, you LevelUp!