Tips to Increase Your Financial Wellbeing Print

June 2010

It might be a cliché, but knowledge is definitely power. Especially when it comes to making informed decisions about your personal finances and debt. Below are some valuable tips which you can use to protect your financial interests and increase your overall financial wellbeing.

  1. Know Good Debt from Bad: Good debt means you are able to borrow money and repay it on time. This way you are able to build up a good credit record, which enables you to borrow in the future. On the other hand, bad debt means you take out a loan, but are unable to repay it on time and you do not have enough money to live on.

  2. Shop Around: Ask for a quote before you take on any debt. You have a right to this in terms of the National Credit Act (NCA). Under the Act, you are not allowed to be charged more than the NCA interest rate limit on your borrowings each year. The rate is linked to the type of debt. In addition, if the credit provider insists that you take out credit life insurance, you can use an existing policy. You are not obliged to make use of the credit providers' credit life insurance.

  3. Be Honest: Do a proper budget and ensure that you can afford the repayment. You should not be spending more than 35% of your salary (after-tax) on monthly debt repayments. If you rely on commission or overtime to obtain a loan, make sure this is sustainable before you borrow.

  4. Reduce Interest Repayments: If you can save some money before taking out a loan and use this as a deposit, you can greatly reduce the amount of interest that you pay on your borrowings. Avoid using the budget facility on your credit card as this simply extends the period over which you repay the loan - with the result that you end up paying more in interest.

  5. Be Proactive: If you have difficulty paying back the amount you have borrowed every month it should serve as a warning sign that you are running into financial difficulties. Talk to your credit provider as soon as you think you may not be able to repay them so that you can renegotiate the terms of the loan. You also have the right to make use of a registered Debt Counsellor, who will help you to reschedule your debt, when you are over indebted.

  6. Be Punctual: Pay your debt or accounts on time. If you do not, this information is reflected on your credit report and this reduces your credit rating. When you have difficulties with your repayments, pay what you can afford - don't stop with repayments. This will be an indication to your credit provider that you are attempting to repay the loan and this is normally accepted in good faith.

  7. Understand Loan Terms: When you are in trouble with your repayments, your bank makes use of Section 127 of the NCA, which states that you return the assets and give the bank authorisation to to sell these assets or items on your behalf. However, the bank also has a right to collect the difference from you irrespective of what they sold the assets for. The alternative to returning assets on a voluntary basis is to sell the assets yourself or to apply for debt counselling where your repayments will be rescheduled in line with your budget.

  8. Protect Assets: If you purchased a vehicle on credit, you must keep it insured. If you do not, the bank has a right to remove the vehicle on a temporary basis until you provide them with proof of payment. It is also good to shop around for insurance in order to get cheaper cover if possible. Make sure your home insurance is also up to date.

  9. Rainy Day Fund: Create an emergency fund and plan for major expenses. As a minimum, it is a good idea to keep an amount free on your credit card limit for emergencies. In case of an emergency the Consumer Protection Forum has a few useful contacts:
  • National Credit Regulator - 0860 627 627
  • Council for Medical Aid Schemes - 0861 123 267
  • ICASA - (011) 566 3000
  • Department of Trade and Industry - 0861 843 384
  • Financial Services Board - 0800 110 443
  • South African Saving Institute – (011) 269 3789
  • Credit Ombuds – 0861 662 837
  • Council for Debt Collectors – (012) 804 9808; (012) 804 8483; (012) 804 3402

If you would like to learn more about how you can manage your money better, Compuscan Academy has a workshop on the subject. You can contact us at Tel: +27 21 888 6000 or e-mail us at This e-mail address is being protected from spambots. You need JavaScript enabled to view it or you can visit our website at www.compuscanacademy.co.za.