Debt management advice
Given our current economic state, where the cost of living continues to increase and unemployment remains high, learning the importance of savings and financial management has become crucial.
If you’re not financially savvy, you could end up making bad decisions that can be costly. Having even a basic knowledge and understanding of a few key financial processes, can help you make better financial decisions.
For many, the option of “easy loans” and other types of credit is often seen as a quick fix to deal with their financial challenges.
For this reason, the Office of the Consumer Protector has put together a Financial Literacy Education Programme to help you understand both the positives and negatives about credit.
Once you have the confidence to make responsible financial decisions you can avoid financial mismanagement and considerable stress.
Why is financial planning important?
According to the Office of the Consumer Protector, there’s 5 reasons why financial planning is important.
1. Save more, spend less
No matter who you are, or how much you earn, getting into the habit of saving is important.
There are 3 types of savings methods: short-term, medium-term and long-term savings. Depending on what you’re saving towards, you’ll be able to determine your method of saving.
Short-term saving is when you save for a few months to a year while medium-term saving is anything between 3 – 5 years. Long-term saving is when you save for 5 – 20 years.
2. Learn how to budget and stick to it
A budget is a plan you use to make your money work harder for you and to prevent you from over-spending.
A budget can help you to:
- plan and manage your own financial well-being,
- develop an understanding of your income and expenditure patterns,
- plan short and long-term financial commitments, and
- plan your future carefully.
To see an example of a fully balanced budget, read our financial literacy booklet (page 7).
3. Managing your accounts
There are many different types of accounts, each with its advantages and disadvantages. To manage them correctly, it’s important to understand how each one works.
Tips for managing your accounts
1. Know how much and types of accounts you have.
2. Open account envelopes (balances and instalments).
3. Buy what you need, not what you want.
4. Managing your debt
To be in debt means that you owe somebody money. This could be micro-lenders (e.g. money borrowed to start a business), account purchases (furniture, clothes) or friends or family who lent you money.
What happens if I can’t pay my debt?
Besides creating a bad credit history which will make it harder for you to borrow money in the future, legal proceedings can be instituted against you if you don’t pay your accounts on time. A garnishee attachment order can also be instituted against you.
5. Preparing for the future
Nobody likes to talk about death, but have you thought about what will happen to your family after you die? If you die without leaving a will, the Master of the High Court freezes your estate. This includes any money you have and all your possessions and decides how to it should be shared.
A basic will can be bought at a stationery shop and signed by you and 2 witnesses, but it’s best to go to consult a lawyer or your bank who will be able to help you
draw up a professional will.
There’s help available
If you’re feeling overwhelmed by your debt and interested to know more about:
- why there's a need to budget,
- how to budget,
- what you can do if you're over-indebted,
- who will be able to assist you, and
- emolument attachment and garnishee orders.
Contact the Office of the Consumer Protector to learn more about the Financial Literacy Education Programme.
Tel: 021 483 9282
Toll-free: 0800 007 081
Fax: 021 483 5872
Don't let your debt get out of control