With many consumers starting out the year with holiday debt and tough times coming up, now is the time to review your finances and start 2016 on a sound financial footing.
“This year is going to be tough on South African consumers due to the volatile rand, increased living expenses, including the anticipated increases in the cost of electricity, water and food, so the earlier you get on top of your finances, the better it will be in the long run,” says Chris Labuschagne, CEO of FNB Credit Card.
Take responsibility for your money
It may be tempting to hide your head in the sand says Labuschagne. This is especially true after the holiday season. “But, never pay debt with debt, while it is possibly easier to apply for another short term loan or increase your credit limit than it is to take responsibility for your spending, this will quickly result in serious financial difficulties,” says Labuschagne.
Consumers need to not only consider the implications of overspending at the holiday season, but also to realise that the current economic climate is mostly likely going to result in higher interest rates as well as pushing up the price of goods. This means that debt will become more expensive to pay off.
“The need to spend wisely is a reality, due to the tough economic climate, companies may cut down or not pay out bonuses,” warns Labuschagne. “Consumers cannot rely on additional incentives to pay off their debt.”
Back to the basics
“It may seem simplistic, but it is surprising how many people don’t know what is coming in and going out of their bank accounts,” says Labuschagne.
The only way to ascertain this is to pay attention and carefully analyse your bank statements.
“Without scrutinising your income and expenses, there is no way to really understand if you are able to make your monthly payments, and most importantly where you can cut down. Make sure that the money that goes out of your account at the end of the month, is less than your income,” warns Labuschagne.
From this you will be able to draw up a budget for the upcoming months.
“An analysis will soon highlight what expenses are necessities, such as bond repayments and upcoming school fees, but it will also show where you are able to cut down,” says Labuschagne.
This may mean some hard choices for the next few months as cutting down on unnecessary expenses is the only way to get on top of debt.
Here are a few helpful tips:
- Stay at home and do not eat out as much
- Stay far away from shops that may be tempting
There are also ways of cutting expenses indirectly, such as making an effort not to use excessive water and electricity to bring down municipal bills or car pooling to save on travel and fuel costs.
“Make sure that every rand you spend in the next few months is necessary. Proactively plan your shopping by drawing up a shopping list, this will help you avoid unplanned spend,” suggests Labuschagne.
Use alternative spending such as rewards and value-adds
Most service providers will offer some type of value-adds, whether it is your cell phone provider, your medical aid or your bank. Make the most of these rewards to try stretch your rand.
“Make your money go further by making full use of value-adds, this could mean paying for petrol or groceries or even online shopping for back-to-school stationary with your rewards programme and embedded benefits,” says Labuschagne. “These will assist you in avoiding the use debt to pay for everyday goods.”
Talk to your bank
“Talk to your bank if you think there may be difficulties on the horizon, the sooner you pick up the phone the better,” says Labuschagne. “They can assist you restructure your debt, before you are forced to do so by collectors and attorneys, resulting in you having a bad credit record. The bank may be able to assist you by putting your credit card repayments on a budget plan, or relooking at the terms of your personal loan, they may even be able to assist with a payment holiday on your bond if you really find you are in trouble.”
Taking responsibility for your money will help you get through 2016 financially.
Alan Straton
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