Feeling the pinch past Valentine’s Day?
Here are some handy tips to help you stay clear of the debt monster.
Mellony Ramalho, the executive in sales and branch network at African Bank, provides some easy tips on ensuring you stay clear of debt.
Beware of the credit seduction
Did you know that for every R1 000 you earn, credit providers will extend credit of R3 000? Ramalho says credit can be very enticing yet it is important to not extend credit limits simply because it’s offered.
Credit is expensive. Also, understand that plastic money – store cards and credit cards – are debt and debt is expensive. Remember this important note before you decide to swipe that plastic card.
Is that an essential?
Self-control is one of the most challenging personal traits people constantly battle with. The trick, according to Ramalho, is to differentiate between what essentials are and what one can live without.
By cutting out small expenses every month you can save a whole lot in a year. Consider what you are spending on a cup of coffee, chocolate bar or pie from the local garage shop and think about what you could save if you planned better, packed lunches and avoided those quick pop-ins to the store. A grocery list is a great idea when shopping to avoid overspending.
A payment a month keeps the debt collectors away
Don’t skip payments, make short payments or make late payments. This not only causes unnecessary harassment from creditors, it also brings down your credit score which may potentially put you in a position of being declined credit should you need it in the future. Paying the minimum required installment every month will assist you in having a healthy credit score.
Appreciate a good deal
If you cannot afford it, rather skip it. Ramalho explains that even when an item is marked 50 per cent off or a buy one get one free deal, if you haven’t budgeted for it and you need to borrow (credit) for it, you cannot afford it.
Join forces with your partner
A great idea is to form a financial plan with your partner. Finances form a huge part of a relationship so it is important for two people to share their financial goals in order to live in harmony. Talk to your partner about your debt and work together to put a healthy financial plan in place. Visit a financial advisor together if you need to.
Understand charges
It is very important to understand interests and fees being charged to avoid being overcharged. A good idea is to shop for the lowest interest rates.
When buying on credit, read the contract carefully for hidden costs and make sure you are paying for what you are purchasing. Make sure you receive a copy of any contract that you sign. Do not sign blank contracts with any credit provider.
Beware of adverts saying things like ‘blacklisted welcome’, ‘loans available, no credit checks’. These are unregistered loan sharks (mashonisa) who charge exorbitant interests.
Don’t take on any new debt
If you are borrowing from one person to pay another, stop it.
Have a plan to close existing debt to free up funds but also stop trying to keep up with those around you. The chances are that they are also drowning in debt that you don’t see. Ramalho says it is important to live within your means.
Save
No matter how little you think you earn, set a saving goal and stick to it.
How did I get here?
If you have been doing some reckless spending and you are drowning in debt, the National Credit Act introduced debt counselling to assist consumers who are over-indebted. Debt counsellors help restructure your debt by negotiating less payment amounts to help you survive. Debt counsellors also assist in a case where repossession of assets is about to take place. Get in touch and get help.
Do it now.
Whatever improvements and adjustments you have to make to your financial life – start now.
“Let this month be a time when you learn to love yourself again by getting on top of your finances. It’s not impossible. It just takes discipline. Happy love month,” says Ramahlo.
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