2017 is on us with a bang, and we're sure many of you want to make it your best year yet! It often happens that many people with big dreams find themselves weighed down with too much debt to take a brave new step.
Last year we reported that 2016 didn't started with the best back story. A rocky 2015 left the South African economy so to speak in a ditch. With two interest rate hikes implemented by the SARB (South African Reserve Bank) in 2015, it became increasingly difficult for South Africans to service their debt.
Looking back, 2016 was a tough financial year for many and no doubt many of the big dreamers put on more debt weight than they could handle. No Christmas puns intended! So, to help you make the best of a fresh year, we put together some tips to help you get rid of that weighty debt.
Here follows 5 Solid Credit Habits that will help the average South African to be better of than what they would have been.
1. Budget - he who fails to plan is planning to fail
Start your year with some tight budgeting. Even if you don't have masses od debt! Draw up a budget and regularly plan to see what your income will need to cover and what money remains to be used with wisdom. A bad attitude is not the way to approach life with, but to plan your debt payments as if an interest rate hike is imminent can help you in the years to come. Don’t take out loans that will place unnecessary pressure on your budget. Pushing your cash flow to the limit to repay a loan means you are one financial setback away from serious financial trouble. South Africa is already experiencing high inflation rates compared to years gone by. Many South Africans are in situations with bad credit because of spending inadequate time on calculating a credit budget.
Did you know Fincheck is releasing a tool in 2017 that will help you budget? Sign up here to get access first when we release!
2. Prioritize debt payments
You will have your reasons for your current financial priorities. But if you don’t place a high regard upon the servicing of debt it may come back to haunt you a few months down the road. Terms and conditions differ across the various credit types. A sure thing remains, though – bad credit won’t do you any good. Whether it means loss of property or negative entries on credit records, the effect of not prioritizing debt payments will have a bad effect on the health of debt and your future credit habits.
3. Pay on time
As difficult as it may seem, do your utmost best to pay your monthly instalments on time. Rising interest rates will only increase bad debt. And knowing the power of compound interest, the rate at which your bad debt will grow will only increase over time. Turn this around and show people what solid credit habits look like.
4. Only consider loans with a positive return on investment.
It is possible that someone may fall into dire need and a loan is the only option out of trouble. But for all other purposes only take out loans that will either lead to the growth of your income or to the increase of your lifestyle as a whole (keeping in mind the negative impact a monthly instalment makes on your bank balance). The iconic investor Warren Buffet once said that price is what you pay and value is what you get. Make sure that the value you get from the loan will outweigh the monthly instalments you’ll be required to pay.
5. Pay just a little bit more than the minimum required.
If your terms and conditions allow for early repayment, make use of it. This will ensure less down payments on interest in years to come. In the short term you will lose that bit of money you pay extra, but in the long term, you will gain it all and more back in the form of savings on interest that couldn’t accumulate on your debt. PLUS, this will lead to an excellent credit record (if you never skipped payment due dates). Excellent credit records will open up doors to greater credit financing options that you can leverage to grow your financial assets.
Even if you are only a holder of a few low limited credit cards, follow these principles to ensure good credit habits. Fincheck believes 2017 can be your best year yet! It all rides on your decisions.
P.S. The Fincheck team is happy to let you know that you can use our latest FREE MyFincheck Credit Score Tool to get a grip of your debt situation. Register from the homepage to check your credit score!