We all know how debt remains a noose around our necks, which seems to be getting tighter on a monthly basis as the cost of living continues to rise.
Bearing this in mind, the most obvious starting point would be to settle as much of your debt as possible before interest rates rise again and your debt ends up costing you more in the long run.
“By reducing your debt, you’ll lower the amount of money you waste paying back the interest,” says Liberty financial planner Palesa Tlholwe. “There are different strategies for paying off debt. One method advises getting rid of the debt with the highest interest first, since it costs you the most every month. On the other hand, you could choose to focus your paying-off efforts on the smaller debts first, then use this money to pay off your larger bills.”
Despite our best intentions, most of us are guilty of overspending during the festive season. Esther Ochse, FNB Financial Advisory channel head, suggests that now is as good a time as any to get ahead of your festive season expenses and minimise the ‘Januworry’ blues.
“Where possible, start buying some of your family’s gifts now and stock up at a pace suitable to you. This will help you avoid the impulsive spending habits that are associated with the festive season and separate that budget from the rest of your money, but this requires a lot of discipline,” she warns.
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If you’re already over-indebted Mduduzi Luthuli, wealth manager and Luthuli Capital founder says consumers should also consider approaching the banks to arrange a consolidation loan where all your outstanding debt is combined into a loan with one monthly repayment. A consolidation loan can reduce your debt repayment amount by between 10% and 30%, Luthuli says.
If you’re not increasing payments on your bond, think about boosting your emergency cash reserves.
“Even though interest rates have been flat over the last few months, consumers aren’t out of the woods yet because the overall state of the South African economy remains fairly delicate. The cost of living is still relatively high with more food price hikes predicted for the remainder of the year,” says Ochse.