Photograph: Waldo Swiegers, Bloomberg.
By Emma Mer and Lee Mhlongo
Last year taught many South Africans the value of applying good money management principles while servicing credit.
Over the past year, many South Africans have had to revisit their budget and make meaningful financial changes.
Being debt-free is possible but not always easy to achieve. However, there is an opportunity to explore avenues to free up additional cash flow through applying good money management principles while using debt in a responsible manner.
There are four tips on how to apply good money management principals to free up cash flow even though you have debt obligations:
1. Save on fees by switching: When you switch your qualifying credit into a single agreement you could save on monthly credit service fees. Your revised personalised interest rate might be lower than the interest on your previous repayments which can help you save on interest paid and, in turn, free up cash flow.
By switching, you can also free up monthly cash flow, or save on the total cost of credit over the lifetime of your loan, depending on what works for you.
2. Make sure that you benefit from maximum rewards and value-adds: Reward programmes can unlock multiple ways of saving; it could be through discounts, depending on your reward tier or through maximising your spend with rewards so that you can minimise your cash spend.
The ability to earn extra could be dependent on the type of products you hold and how you manage them – it’s therefore helpful to spend some time understanding the rewards programmes you form part of. Spending in a certain way or at certain shops with your cards, setting up an auto payment on your credit card or having certain products with your financial services provider could also help you earn more rewards.
3. Keep track: The single most important rule when it comes to including credit into your financials is to ensure that you do not take on more credit than you can afford and, once you have credit, make sure you meet your minimum repayments every month.
4. Understand the cost implications of the products and offerings available to you: Some insurance products automatically adjust their cover amounts and monthly premiums in line with the outstanding balance on your home loan. Should you make any extra payments into your home loan, you’ll not only save on interest, but your credit life cover and premium will also reduce. If you need to access money from your home loan again, your insurance cover will increase to make sure you remain fully protected.
Whether you need to better manage your money during unique circumstances or for ways to better handle your credit agreements and potentially save, reach out to your credit provider, and use the educational tools available to you, to explore your options.
Emma Mer is the chief executive of FNB Loans and Lee Mhlongo is the chief executive of FNB Home Finance.
PERSONAL FINANCE
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