Stick to budget and be debt free

This free advice is given from business development company Direct Axis which says 78 percent of citizens’ disposable income is tied to servicing debts.

Some households are said to spend nearly all their money on instalments with nothing to save or no money to pay for any mishaps. This compels them to incur additional debt, further deepening their financial crisis. Worst still is when they rely on informal lenders who charge exorbitant interest rates sometimes similar to the initial capital granted.

The company says a rule of thumb is to limit debt to 35 percent of monthly income.

The company offers the following advice;

Record all expenses to keep track of expenditure and prevent unnecessary and frivolous spending.

Draw a budget on a piece of paper. On the left side write the household income from salary, money and odd jobs. On the right side, write down all expenses including loan repayments, food, cellphone and other costs. Save any money left over which will be tax free up to R30 000 a year.

Consolidate all debt into one loan to pay all creditors. Repaying one loan in 24 to 36 months makes it easier to manage finances, to save on a number of monthly account fees, and to avoid having credit cards which charge high interests.

Avoid using any cards. A useful rule against indebtedness is not to buy an item if you can’t afford to pay cash. If necessary, save for it.

Shop smarter by comparing prices, shopping around for bargains, deals, savings and, by using retail loyalty offers and incentives.

Make home sandwiches to cut unnecessary spending on eating out and takeaways. Cut out a R10 cup of coffee each day and save R300 a month and R3 600 a year.

Supplement income by selling old clutter or earn extra income by house-sitting, using other skills or hobbies like carpentry and baking. Save the extra money or pay off high-interest debt first.

Start an emergency fund for unexpected expenses to avoid borrowing in order to solve problems.

Save windfalls like bonuses and tax refunds or, use them to pay off debts. When saving, seek the lowest interest costs and always ask for tax-free savings options.

Stick to a good financial habit of paying off high-interest debts first, shut down store accounts and cancel credit cards to avoid future temptation.

Details: Andiswa Dlokolo; andiswad@meropa.co.za

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