How debt-aware are you?
Wealth and management planner from Krugersdorp gives tips to manage debt.
During lockdown, many South Africans struggled to meet their monthly financial obligations. Even after the worst of hard lockdown has passed, being in debt is the reality many are facing now.
But just how debt-aware are you?
The News spoke to Julie Stothert, wealth and management planner at Ferox Financial Services. She said it is very important for people to be very careful when they take on debt because if they don’t keep track of their debt, they could end up being unable to repay it.
“And then they end up having to sell their belongings to get out of debt,” she warned.
Julie shared five ways to manage your debt:
1. Prioritise your debt repayments
Pay more than the expected repayment amount on the debt with the highest value to save the most on interest.
2. Make a list of your debt on a spreadsheet or in a book under the following headings:
a) The company or person that you owe to
b) The value of the debt
c) The interest rate
d) The repayment amount
You can even include this in a budget
3. Draw up a budget
Draw up a budget reflecting your income and expenses. Try to stick to it as far as possible. Make sure you allow for an amount to be saved so that you have funds available for emergencies if needed.
Allow an amount for entertainment, if possible. The idea is to manage your money, not to cut out all the fun!
4. Adjust your budget as you go along
If you have repaid one of the debts, then use those funds to fast-track repaying another debt. If you have new debt, amend where necessary. Remember that you cannot spend more than what you get in.
5. Analyse the real cost of debt
Make sure to double-check the interest rates and costs charged on loans before committing yourself.
The Covid-19 pandemic has been devastating, forcing many to borrow money to pay for day to day expenses. Be mindful of the actual amount you end up having to pay back. If you look at the total cost over the period you will be horrified.
Julie also suggested that people should start managing their finances from the moment they start earning, adding that many fail to plan for rainy days. She suggested putting money aside every month for when you need to buy new tyres, or for urgent medical care.
“It is not necessary to live day to day,” she said.
