December debts ‘will take their toll’
Experts urge SA consumers to get a grip on their finances before their January pay-cheques go up in smoke.
|||Cape Town - While today’s pay-cheque may come as a relief for most consumers, experts said the bulk of this money would probably be used as damage control for debts incurred in December, and that things will get tough.
FNB credit card chairperson Chris Labuschagne warned this year is going to be tough on South Africans due to the volatile rand, increased living expenses and increases in electricity, water and food costs. Making a loan to pay off a debt may seem like an easy solution, but Labuschagne said this would result in serious financial difficulties.
“Consumers need to not only consider the implications of overspending at the holiday season, but also realise that the current economic climate is likely to result in higher interest rates. This means that debt will become more expensive to pay off,” said Labuschagne.
DebtBusters marketing head Wendy Monkley said the day after January’s payday would be the most shocking for many South Africans.
“This will be the day that money comes in and goes straight out, and we expect people will find themselves left short with no money for living through February. Consumers with high levels of debt are headed towards serious cash-flow shortages in 2016.”
Financial adviser Paul Roelofse said debt is easy to get into but difficult to get out of.
“Prevention is always better than cure, but the reality is that we get enticed into debt over time. The cost of debt climbs quickly and robs us of the potential to create wealth,” said Roelofse.
One way to get a grip on your finances is to take stock of your income and expenses by drawing up a budget on a sheet of paper.
Roelofse said you should be focusing on living expenses and split them into “nice to haves” and “must haves”.
“This is the hard work as you have to be brutally honest with yourself in identifying what you need and what you can do without.
“Now is also a good time to get down to formulate an action plan for the new year.
“Work out the damage before the statements arrive at the end of the month. The earlier you start the more prepared you will be before your next salary. You are going to need to sacrifice somewhere to make up for the over indulgences of the festive season.”
Budget Insurance spokes-person Graham Craggs said once you have trimmed down expenses, channel the extra money into paying off your debt faster, starting with those with the highest interest rates first.
“Make sure your budget has a goal, whether it’s to pay off your credit card debt or to save money for a family holiday. Working towards a goal provides direction. Be realistic,” said Craggs.
“If you set too lofty a goal and reaching it means deprivation on all fronts, the likelihood of you sticking to your budget is minimal.”
nicolette.dirk@inl.co.za
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