MAKE YOUR 2020 FINACES COUNT

Every year offers a unique opportunity to save money. If you're like most shoppers, you're watching your budget in January after a season of holiday shopping. The following tips are creative ways to help you get your finances back on track in 2020.

• 
  
• Envision the end from the begining

Start the year with the end in mind! Decide what you want to achieve personally, physically and financially in 2020 and set daily, weekly and monthly goals aimed at your end goals.

• Plan

Having a goal without a plan is merely a being wishful! Set up a budget to serve as the plan on how you are going to spend and save your  money. A budget is a great way to keep track of your expenses and determine how much you have for expenses, savings and discretionary spending.

• Aim to become Debt Free

Calculate your total debt and decide how and by when you are going to pay it off. Start working towards eliminating your debt by paying as much as you can on the debt with the highest interest rate. 

ANALYSIS (DEBT REVIEW / CONSOLIDATION)

Confusion surrounds the concepts of DEBT REVIEW and DEBT CONSOLIDATION.

Although both are classified as debt management tools that restructure your multiple debt accounts into a single, affordable repayment plan to reduce the stress of having to keep up to date with debt repayments, there are some important differences to be aware of.

• DEBT CONSOLIDATION

This is essentially another loan that covers debt up to R300 000.

You need a good credit score to be eligible to apply. While this might be tempting, it is important to note that you have NO legal protection of your assets during the repayment period, and your debt actually increases over time because of the high interest you’re paying on the loan. This means that in event of failure to meet payment, creditors can still take action against you. 

• DEBT REVIEW

The programme entails a formal debt rehabilitation programme introduced by the National Credit Act in 2007, and regulated by the National Credit Regulator (NCR).

Its aim is to ensure fair practice to consumers who are genuinely struggling to make ends meet every month due to debt.

The programme covers an unlimited amount of debt, and your credit score is irrelevant - even those who have been blacklisted are eligible to apply.

Anyone who has a monthly income which puts you in a position to make a reasonable offer to your credit providers may apply.

There are no other upfront fees when applying for DEBT REVIEW

Your debt counselor's fees - which include a once-off restructuring fee  plus legal fees are all included in your debt repayment plan.

Your first two to three restructured payments are collected to cover the restructuring and legal fees, and are payable when your debt review application is approved.

Like in any service industry, it is advisable to do your homework on the debt counselling firm you decide to approach, before deciding to sign up.

EARLY OCTOBER BLOW FOR MOTORISTS

Cape Town:- Fuel prices will go up come Wednesday, according to the latest increase announced by the Department of Energy (DoE). Both grades of petrol, 93 and 95 (ULP & LRP), will increase by 99 cents and 100 cents a litre (c/l) respectively from midnight on Tuesday. Diesel 0.05% sulphur and diesel 0.005% sulphur will both increase by 124c a litre. Illuminating paraffin (wholesale) will go up by 104c, while illuminating paraffin (SMNRP) will cost 139c more per litre. The maximum retail price for LPGAS will spike by 179c per kilogram.

The department has attributed the rising fuel price to the weakening rand exchange rate. "The average rand/US dollar exchange rate for the period 31 August 2018 to 27 September 2018 was 14.7899 compared to 13.9430 during the previous period.

"This led to a higher contribution to the Basic Fuel Prices on petrol, diesel and illuminating paraffin by 48.72c/l, 51.03c/l and 50.62 c/l respectively," the DoE revealed. The DoE's announcement comes shortly after the Automobile Association (AA) on Friday warned that fuel users are facing unprecedented price increases in October that it described as "catastrophic" for road users. It warned that South Africa could experience its biggest fuel price hike in the country's history in October.

KNOW MORE ABOUT DEBT REVIEW

Cape Town - A while back we wrote about how you can slowly wean yourself off debt by putting what you save on day-to-day expenses into settling your debts one by one. You begin with the smaller debts with the highest interest rates, such as credit card debt and personal loans, and slowly work your way up to your larger debts, such as your car loan.

It may be tough, but it is a relatively straightforward route to financial freedom. 

However, many South Africans are beyond the point of being able to do this. They are simply in too deep. Their debt repayments are consuming the bulk of their income, and they may be regularly missing repayments.

If you are in this position, you are probably what is referred to as “over-indebted”, and your debt problem is so big that, even if you have been ignoring it up until now, you simply can’t ignore it any longer. You may have creditors hounding you or threatening you with legal action, and your credit record is probably so tarnished that more credit is impossible to 

obtain.

You need professional help, and the sooner you admit it, the sooner you can begin the  road to paying off your debt and clearing your name.

Fortunately, the law will support you if are you genuine about going this route, and there are real benefits in the form of protection from your creditors and lower interest rates.

The route is known as debt review, or debt counselling. It was established through the National Credit Act with the objective of addressing this country’s enormous consumer-debt problem and is controlled by the National Credit Regulator (NCR). 

What is debt counselling?

Debt counselling is a regulated process whereby a qualified debt counsellor (registered with the NCR) negotiates, on your behalf, with all your creditors, to have the term of each credit agreement extended and the instalments reduced. Your debt counsellor may also persuade your creditors to reduce the interest rates on your credit agreements so that you can afford to pay off all your debt as soon as possible. The counsellor then structures a customised plan that consolidates your debt in a single monthly payment and allows for essential household expenses.

What to consider when going under Debt Review?

• You need to have a stable form of monthly income.
• You need to be approved by the debt counsellor as being over-indebted, according to the definition in the regulations (see "Definitions", below). If you fail to meet the criteria, you will not be allowed to go under debt counselling.
• There are fees involved (see “Debt-counselling costs”). These fees are regulated by the NCR.(First two reduced installments to cover legal and Debt Counselling fees).
• You will have no further access to credit until you have completed the programme and cleared your name.

At the end of the process you will receive a clearance certificate that will require your creditors and the credit bureaus to remove any information about the debt review and your previous unpaid debts from their systems.

The length of the programme depends on the amount owed to creditors. You can also make additional payments to your creditors during the process – for example, when you receive a bonus or 13th cheque. Remember, you are in control of your own finances and the debt review process.

SIMPLE STEPS TO GET STARTED WITH RETIREMENT SAVINGS

Cape Town - While saving for retirement may seem tough at first, it gets easier once you are in the habit. And the good news is you won’t regret it: the decisions you make today will have the greatest impact on the quality of your lifestyle once you retire.
While you may feel you don’t have room in your current budget to accommodate saving for retirement, small financial sacrifices can help. It may be easier to make space for retirement savings than you have anticipated.

Assess your spending habits
Start with a reality check: keep a running total of everything you spend in a given month. Write down every item from your morning coffee to that late-night takeaway. You may find you are spending too much on items you don’t really need.

Consider this: it costs more to have a monthly DSTV subscription than most minimum monthly contributions towards a retirement annuity or a unit trust investment - many financial services companies offer investment minimums of just R500 per month.

Create a budget
Once you have an idea of where your money is going and where you can potentially cut back, draw up a budget. This will help you to understand how much of your income needs to go to fixed expenses and how much is left to play with. Next you need to think about your spending priorities. It’s up to you to place retirement savings near the top of the list.

Ultimately you should look to moving ‘retirement savings’ into the fixed expenses category, making a commitment to investing each month. It’s amazing how quickly you will get used to a little less disposable income.

Calculate how much you need to save each monthAccording to a research carried out by Allan Gray, to save enough to eventually withdraw an income of 75% of your final salary (widely believed to be the amount you need to maintain your lifestyle), you need to have saved twice your annual salary after working for 10 years, five times your annual salary after working for 20 years and 17 times your annual salary after working for 40 years.

Consider how long you have until you retire – this will influence how much you need to save each month to meet your targets. You then need to think about how much risk you can stomach – higher risk investments such as equities tend to deliver higher returns over time but the ride may be bumpy as returns can go up and down. Finally you need to consider whether or not you may need to access your investment before you retire. These elements will inform which products and underlying investments you choose and how aggressive you need to be to achieve your goals.

Do some homework
Take the time to research investment managers and what they offer. This will help you to be confident when you make your decisions, and prevent you from jumping ship at the wrong time and potentially losing money. Successful investing is all about the right partnerships. Objectives need to align, value systems should resonate and trust plays a key role. These criteria should guide your decision when picking an investment manager. If you make the right choice, you could be on the path to a successful long-term relationship.

Automatically increase your future contributions
When you sign up for retirement savings consider an automatic escalation. Research has shown that if you commit in advance to allocating a portion of your future salary increases towards your retirement savings you are less likely to feel you are making a sacrifice. This is because your increased contributions towards your retirement savings will be deducted before you have a chance to enjoy the increased income.

Don’t procrastinate
Each month that you put off saving in favour of spending either increases the amount that you’ll have to save in the remaining months, or pushes out the date at which you’ll reach your goal. Few investors in their 20s realise the drastic impact of only starting to save in their 30s. Putting off saving for 10 years can chop a massive 40% off your end amount.

Acknowledging your future financial needs and making concrete plans to meet these is a discipline that will benefit you and your family enormously.

If putting a plan in place and choosing investments is daunting, an independent financial adviser can help you analyse and adjust your monthly expenditure to help you make space for retirement saving.

RETIREMENT SAVINGS - WHY THEY ARE IMPORTANT

The South African government’s old age grant is R1500 per month. Could you live on that?
This amount is less than many of us currently pay towards our cars, or a monthly grocery shop, or a weekend getaway. Unless you think you can survive on this meagre amount, there is no time like the present to start saving for your retirement.
While retirement may seem like a goal too far in the future to affect you if you are under 30, or you may feel like you have missed the boat if you are over 40, we aim to help you answer the question of why you should save for retirement and aims to help you to get started – regardless of your age and life stage.

Is your future a priority?
Between bond or rent, car repayments, schooling and day-to-day survival, there are so many things competing for a piece of the salary pie it is no wonder that saving for retirement falls off the priority list. And once we are done with the monthly expenses, the needs and wants of our current selves take priority over our future selves. We are victims of our instant gratification culture.

According to survey carried out by Sanlam, only 6% of South Africans will be financially independent when they retire; the rest will depend on family or the state pension. This is some scary statistics and really a point to ponder on!

Put yourself in the shoes of your future self
We tend to invest in our bodies and minds, following health and wellness advice, without appreciating the importance of directing some of this spend towards saving. Consider yourself in the future: older, but grateful that you exercised regularly and drank plenty of water and thankful that you took calcium to strengthen your bones and used lotions and potions to slow the ageing process. Imagine how grateful you will be if there is enough cash in your bank account to allow you to maintain your current standard of living when you are too old to work.
It is hard for all of us to have empathy for our ageing selves, but this seems to be particularly challenging for Millennials (i.e. anyone born between 1980 and 2000).

Goldman Sachs notes that tech-savvy Millennials are poised to reshape the global economy; they have a different set of priorities and expectations from previous generations. However, as many are encumbered with student debt, or still living with their parents and putting off marriage and parenthood, a distant goal like saving for retirement is very far off their radar.

If you fit into this age group it’s not all bad news: you are exercising more, eating smarter and smoking less. This is great – but makes it even more important to put saving on to the radar as your healthy ways are likely to promote longevity, meaning you are likely to live longer and have more years to provide for yourself post retirement.

One of the key barriers to saving for retirement is that we find it very difficult to connect with our future selves on a personal level. Our behaviour reflects the fact that we see our future self as a stranger. Psychologists explain that, for people estranged from their future selves, saving is like a choice between spending money today or giving it to a stranger years from now.

How to empathise with your future self
One study found that participants who were exposed to a vision of their future selves allocated more than twice as much money to their retirement savings. Visualisation is a simple technique used by numerous achievers – from sportsmen to politicians. Its proponents claim that by visualising an outcome we see the possibility of achieving it and are more motivated to pursue our goals.
Spend a few minutes trying to visualise what you will look like in the future, and the life you hope to be living, before you make financial decisions.

MAKING PAYMENTS UNDER DEBT REVIEW - WHAT YOU NEED TO KNOW

Cape Town - According to the National Credit Act, consumers can choose one of two ways to repay their debts while in debt review.  An organized consumer, who doesn’t mind the risk and effort it takes, can pay each credit provider themselves according to the Debt Counsellor’s repayment plan.  Alternatively, if the consumer wants convenience and less risk, they can make use of an NCR registered Payment Distribution Agency (PDA).  

Paying the Debt Yourself

Paying your court restructured debt yourself allows you more control but it does expose you to additional risks and a lot more work. If you have struggled to handle payments to all your creditors on time in the past then be cautious of this option.You will have to make lots of different payments to different accounts each month (with associated costs).  You need to make sure each credit provider gets the right amount and keep your own records.

Accounts get different amounts each month according to the plan.  These amounts can change often and you need to pay the right amount into the right account each month.

You need to be an excellent record keeper, as your records may later be needed to resolve disputes and to reconcile accounting differences over time.  Many times, it is best to send copies of all payments to your Debt Counsellor for their records in case you lose yours.  Make backup copies. You carry the risk of making mistakes and have to accept the risk of credit providers holding you accountable for wrong payments.  If they receive the wrong amount or money is put in the wrong account with the wrong reference, it can cause them to start additional legal action due to short payments.

Make sure you pay your debt counsellor their fees each month when you pay your debts or you could end up stranded in the process without anyone to help you.

By handling payments yourself you pay normal banking costs for each payment. Sometimes this can be slightly cheaper than via a PDA.

Paying Via A Payment Distribution Agency

Using a payment service provider will mean you have to pay some fees for their services each month. This is offset by not having to pay lots of bank fees and all the time and effort it saves you. 

Make sure that you are dealing with an NCR registered Payment Distribution Agent. These are the only companies recognized by the National Credit Act as allowed to assist.

Making a single payment to the PDA and letting them handle the rest of the work makes your life easier.

PDAs carry insurance in case they make mistakes.  This allows for some peace of mind.  Also, the fact that the NCR regularly checks up on them helps you feel confident your funds are being cared for.  They are not perfect but can be held accountable for any mistakes.

PDAs keep detailed records of each payment and report to you monthly on your distribution.

AIM TO BECOME DEBT FREE BEFORE RETIREMENT

Cape town:- Most South Africans don't know how much time is left before they retire. They don't have a financial plan in place to settle their debts and start investing. Unfortunately, the majority of income earners will have to seriously downgrade their lifestyles when regular income stops coming in.

according to Liberty financial adviser Phillip Kassel,heavily indebted income earners need to be debt-free by the time they retire. "Most employees earn approximately 480 pay cheques in their working lifetime between the ages of 25 to 65. The average person can expect to live until at least 85. This means they need to use these limited pay cheques to fund a retirement income of at least 240 months. At this rate it is hard enough to meet basic day-to-day expenses in retirement without being saddled with debt repayments – so any successful retirement savings strategy must include a debt repayment plan." says Kassel. Ideally, all debt should be cleared by age 45. This allows enough time to boost your retirement fund contributions instead of paying interest over to the bank. In the worst-case scenario, the aim should be to have no debt by the age of 60. Kassel outlines some of the points he thinks can help achive the goal of becoming debt free before retirement.

DON'T cash in pension savings to pay off debt

While it may be tempting to cash in investments that are growing at 10 to 12% per year to pay off debt with higher interest rates, this might result in the individuals missing out on the power of compound growth on the retirement investments.

Kassel explains, "You may be tempted to cash in R100 000 of your investments to repay short-term debt. If you rather focused on paying off the debt by budgeting and cutting back on your lifestyle, you could probably pay off the debts within five years with a payment of R2 900 per month, or by using your bonuses and tax rebates to pay it off even faster."

"Over five years at an interest rate of 25%, you would spend R174 000 to settle the R100 000 of debt. It takes discipline to start saving R2 900 a month once those debts were paid off. In the meantime, if the R100 000 is growing at 10% a year, it doubles in value every seven years. So, after seven years it is worth R200 000, after 14 years it is worth R400 000 and after 21 years, it is worth R800 000. 

"The same applies to home loans. While cashing in your retirement fund to be mortgage-free means you don’t have a mortgage repayment, you still need retirement funds to pay for your day-to-day expenses. Don’t pay off debt with your nest egg – make the necessary lifestyle changes instead." 

Eliminate short-term debt

Short-term debt could derail retirement planning, so paying these off is highly important.  Draw up a list of all the short-term debts and calculate the date the last debt will be paid off. Those who find that their debts will not be paid in time for retirement, should make significant lifestyle changes now in order to accelerate debt repayments. It is absolutely essential that no further debts are taken during this time.

PRACTICAL STEPS TO GET OUT OF DEBT

Debt is like deceit: a relatively minor transgression can trigger a series of increasingly serious transgressions, each to cover up the previous one, until the situation is worse than anything you could have imagined.

The cycle starts simple, for instance you don’t pay off the full amount on your credit card because you have to settle an exorbitant dentist’s bill that the (insert expletive here) medical aid wouldn’t cover.

Some months later you miss a payment on your car because the debt on your credit card has climbed to the point where it’s a struggle even to make the minimum payment, let alone pay the full amount.

Another few months later you take out a personal loan at a prohibitively high interest rate to get your arrear car payments up to date, after some threatening letters from the vehicle finance company. THE CYCLE GOES ON AND ON AND BECOMES DEEPER WITH EACH DAY!

There’s only one respectable way to break the spiral, and the sooner you do it, the easier  it is. Swallow your pride, own up to your mistakes and make amends.

• Swallow your pride and admit you are in trouble - This is the first and hardest step. Admit that you are having financial difficulties and understand that there's no shame in it. 

• Determine the depth of the you’re in - Figure out whether, with a determined effort, you can climb out of the hole yourself, or whether you are in so deep that you need the help of a Debt Counselor. If such a large portion of your income is going towards servicing debt that you don’t have enough for the basics, such as food and transport, you probably cannot do it alone.

• Do your homework. Going back over a few months, make a detailed list of your income and expenses for each month, grouping your expenses into debt repayments, essential expenses, and non-essential expenses.

• Draw up a frugal-living budget. You can’t be killing  an ant and be consuming an elephant! Cut back on the non-essentials until expenses equal income. Then you need to cut some more – even a saving of R500 a month will help.

• Now tackle the debt. Put the R500 (or more) you’re saving into paying off the smallest debt with a high interest rate. This is likely to be a store account, a credit card account, or a personal loan. It may take several months to pay off the account, which we’ll call account A. Once you’ve finished paying off A, take the whole amount you were paying on A (the regular repayment plus the R500), and add it to your regular repayments on account B, another account with a high interest rate. When B is paid off, you will have an even larger amount to pay off account C: in addition to the regular payment on C, you add the R500 plus what would have been your regular payments on A and B. Get it? On each successive account the amount you have available will be more than on the previous one. So you’re turning the vicious cycle into a virtuous one.

Once you’re at a debt level you can live with (the remaining debts should be only the long-term, low-interest ones such as vehicle loans and your home loan, and realistically their combined repayments shouldn’t be more than a third of your income), you can switch to a “maintenance diet”, by still trying to be as frugal as possible while indulging yourself and your family now and again. 

At this stage you might even begin something that you never thought possible: investing.

TIPS TO SAVING MONEY

Capetown - Many South Africans are still slaves to their pay cheques 24 years into democracy. As a nation, we’re indebted to the tune of R1.7 trillion, with consumers spending money they don’t have.

A survey by 1Life insurance, in which participants were asked whether or not they were in debt and whether or not they save, highlights our lack of financial freedom. Half of the participants admitted they could save only 5% of their salary each month, while many said they
relied on credit to make it through the month. And 72% of the participants were in debt.

Lizl Budhram, the head of advice at Old Mutual Personal Finance, says that according to the most recent Old Mutual Savings & Investment Monitor, an alarming 40% of respondents said they have no formal retirement savings (a pension or provident fund or a retirement annuity fund). 

Although most respondents said they lacked confidence in the economy (only 34% felt confident), Old Mutual’s findings show that a third believe the state will take care of them when they stop working – a statistic that has remained fairly constant. What this means, in effect, is that a large number of employed South Africans will not be financially free when they retire, Budhram says.

Financial freedom is attainable however. And it starts with education. 

Nicky White, a financial planner at Lighthouse Financial Services, says behaviour change is desperately needed. “South Africans are known to live lifestyles that our European counterparts can only dream of. This has resulted in financial indebtedness that keeps us in bondage.”

White believes that financial literacy should start at school to teach pupils about the discipline that is required to enjoy a balance between saving and spending money. “These skills would have a better chance of filtering through to adult life later on.”

Financial freedom starts with a budget. Set realistic goals for yourself and develop the discipline to stick with your strategy to reduce spending. 

“Establish a lifestyle you can enjoy and make peace with that.”

Employ a strategy to pay off expensive debt, such as credit cards and store cards. Not all debt is bad, however. “Good” debt would be a mortgage bond on a property.

“Start setting achievable savings goals to gain financial confidence. Short-term goals could be to save for a tangible item. A long-term goal would be retirement and to leave a legacy.”

It’s a journey that you needn’t embark on alone. White says developing a relationship with a trusted and qualified financial planner, who can help to turn your savings goals into a personal financial plan, is critical.

Budhram suggests paying off your most expensive debt first. “Reduce the debt that costs you the most interest, such as store cards. Consider your long-term goals. Remember that saving money for retirement is your most important long-term savings.”

She says saving for the medium term is vital, too. 

“Save something each month towards an emergency fund. This will prevent you from having to go into debt if unexpected situations strike. Protect yourself against loss of income due to death, disability and critical illness.”

The final step in a financial plan is to draw up a valid will, because you must record how you want your assets to be distributed among your loved ones and how your liabilities should be paid for. 

“A valid will is an essential element of estate planning and includes everything you own and owe – from property and cars to investments and debts.

“Speak to a financial adviser about developing a financial plan that is relevant to your individual needs, so that you can live within your means today while still providing for your future,” says Budhram. “We are politically empowered; now make sure you are able to enjoy the real freedom that comes with being economically empowered as well.” 

REGAIN YOUR FINANCIAL FREEDOM TODAY

Cape Town - Many credit active consumers are struggling to keep up with their monthly repayments be it on their mortgages bonds, car loans, credit cars etc. When you find yourself in a position where you fall behind on your repayments its usually a sign that you are over indebted.
Once you default on your credit repayments, creditors' attorneys will come after you! You will have to pay legal costs in addition to your original debt and the interest you owe. The result of this is usually more debt, a judgement against you, garnishment of your salary, repossession of your possessions and/or poor credit rating.

This may sound like you will be stuck in a dead end, however the Government passed into Law a bill called the National Credit Act in 2005 which protects over indebted consumers from legal action. The bill provides consumers with a mechanism where by they pay off their debts in an affordable way while protecting their possessions. It allows an over indebted consumer to get counsel and advice from a Registered Debt Counselor who will assess the consumer's financial situation and renegotiate lower repayment terms with creditors resulting in a reduced, affordable and fixed monthly payment. The process that allows for such is called Debt Review. Once a consumer goes under Debt Review, they are relieved of being harassed by creditors and are protected from legal action being taken against them.

If a consumer opts for Debt Review, they will have more money each month. This is because the Debt Counselor will help you work out a budget that suits your lifestyle expenses. In some cases Debt counselors can reduce the amount you pay your creditors by up to 40% a month. Debt Counselling is the quickest way to regain your financial freedom with a clean credit record.

MAJOR TAXES LIKELY TO HIT YOUR POCKET IN 2018

Cape Town - With VAT having been introduced on a number of products and expected to be in effect from the 1st April, there are a number of big changes that will hit South Africans come April.

VAT hike

Arguably the biggest of these is the increase in the effective VAT RATE, which will rise from 14% to 15% adding approximately R22.9 billion to the fiscus.

Bruce Fleming, a financial planner with Old Mutual Private Wealth Management said that the increase was a tough political decision – but said it was important to remember that it is the first such adjustment since 1993 and was therefore overdue.

However, Fleming warned that all households will feel the pinch of the increase, and while zero-rated food items will take some of the increased burden off the poor, there has been no further developments as to whether more items will be added to the basket or even if additional items will be introduced at all.

FUEL levy

Commuters are expected to feel additional pain from 4 April with an increase in the fuel levy although this increase could be slightly offset by a stronger rand and lower oil prices.

From this date the fuel levy will be increased by 52c per litre on 4 April, pushing up the general fuel levy to R3.62 per litre of petrol, after a hike of 30c per litre last year.

“This is quite significant as it will place an extra burden on all road users especially on those who mostly rely on public transport and will ultimately have an effect on inflation,” said Fleming.

SIN taxes

As expected there was another increase in sin taxes and South Africans will pay between 6% and 10% more for alcohol, while smokers will be paying 8.5% more to sustain their habit.

Fleming said that this is expected to bring in an additional R1.33 billion in revenue in the 2018/19 financial year.

However, the increase in South Africa’s sin taxes are also particularly notable this year, given the recent push towards further legislating both alcohol and smoking regulations.

This means that we could see both a ban on public smoking and an increased drinking age (from 18 to 21) by the next budget speech.

WAYS TO SEE IF YOU ARE OVER INDEBTED AND HOW TO GET HELP

Cape Town - Determining whether one is over indebted has always been a challenge. I guess partly because its very hard for human nature to admit having challenges and seeking help. However, over indebtedness is a serious problem among working South Africans. According to the National Credit Regulator(NCR) statistics released last year, South Africans have been developing a habit of spending not saving. The report shows that there has been an increase in the number of consumers applying for credit. The report revealed that South Africa is currently sitting at more than 25% unemployment rate and the the level of over indebtedness among consumers is almost more than half of active credit consumers and that means more credit consumers are in arrears. There are ways for one to determine how their income is spent and asses whether or not they are over indebted.

UNDERSTAND:

•  YOUR GROSS INCOME

This is the amount you get before deductions and it is liable for deductions towards the South Africa Revenue. Understanding your gross income is really important as you don't want to fall under the illusion that you have a lot of money at your disposal.

• YOUR NET INCOME

This is the income left after SARS tax deductions and is still liable for deductions such as the Pension Fund, Medical Aid etc. Deductions are usually stated in the employment contract.

• YOUR DISPOSABLE INCOME

After all your deductions you are left with your Disposable Income. This is the amount that reflects in your account and expenditure of these funds is your responsibility. This is where careful expenditure is needed.

Having an understanding of the above is critical as the next step will be the DISCRETIONARY INCOME. This is the amount left after paying off everything. If your Debt repayments or monthly installments are over/greater than your Discretionary Income, there is a problem. If you manage to pay some and not all of your Creditors that's an indication you are over indebted as well.

There are ways in which you can manage and and get yourself out of DEBT

1. Buy what you need, not what you want
2. Brain storm on ideas as to how to save on living expenses
3. Seek the service of a Debt Counselor and get help in managing your accounts 

CONSUMER TIPS AHEAD OF THE 2018 NATIONAL BUDGET

CAPE TOWN - With the 2018 National Budget Speech set for this Wednesday the 21st, analysts have been sharing on what they think the budget will be mostly about.

Judging from what economical experts have been saying, there is a huge possibility of tax increase on a number of products.
One possible outcome of the budget is the introduction of Value Added Tax(VAT). which if introduced will see us having it for the first time since 1993. According to Priya Naicker, advice manager at Old Mutual, tax hikes usually affect consumer budgets and expenditure therefore consumers need to plan and budget accordingly for changes  that might arise. Naicker highlights some of the ways in which consumers can prepare for these changes.

• Review and understand interest rates on your debt

According to Naicker, while it may be tempting to purchase on credit, consumers need to consider purchases carefully against the total repayment cost. Consumers need to create a plan to reduce debt and not accumulate it. 

• Review luxury and discretionary spending

"With the introduction of VAT an option, the Treasury might increase VAT on premium items and services like cigarettes and alcohol" says Naicker.

Cutting expenses on these items could provide financial relief.

• Create a financial plan

"A financial plan helps you develop strategies to balance needs in the short, medium as well as long term goals. Combining attention to what you want to achieve with an understanding of your finances and taking action is key to financial wellness." says Naicker. She also added that "A financial adviser often brings the expertise needed to interpret economic factors within the context of individual circumstances to help create a dynamic plan that is adaptable to changing circumstances."

• Save and keep saving

Saving has been and will always be a great way to minimize expenses. Naicker urges consumers to continue cultivating the habit of saving and spending less.