Fin24

Protect your bonus

2011-12-09 07:16

Johannesburg - Experts warn South Africans fortunate enough to receive bonuses this month to adopt a sensible approach.

Protect your financial status by servicing your debt instead of going on a festive spree, is their strong warning. 

Caution is advised as the economic outlook for next year is dimming fast. If the eurozone crisis is not arrested, the fallout will engulf the rest of the world and developing countries like SA are likely to be hard hit. 

If the global economy dips into another recession, jobs will be lost, working hours cut and salary increases reduced drastically as companies' profit margins get thinner and thinner.

It also means those that are unemployed may find it very hard to find employment soon.

There are those, however, who may take the more carefree route after another tough year.

Kim Royds, managing executive for Absa Retail Bank, has cautioned consumers against this approach. Royds urged consumers to set aside a portion of their bonus towards servicing their debt.

"The biggest gift that anyone can give themselves is to invest a large portion of their annual bonus or any spare cash... towards easing their debt," she said.

A large number of South African households are still in debt with the debt-to-income ratio still hovering at around 77%.

At a recent consumer forum held at Gallagher Convention Centre, Minister in the Presidency Trevor Manuel lamented that South Africa is a nation of highly-indebted families.

There are 18.84 million credit active people in South Africa, about 8.8 million of whom are described as having impaired credit.

"This is all as a result of spending money we have not earned yet and spent it on goods that we don't need. South Africa has a low savings rate and so people borrow money at emergency rates," Manuel said.

Tshiwela Mhlantla, managing executive of Absa Personal Loans, urged consumers to start with servicing the most expensive debt. "They should always seek advice from their banks or registered financial institution," Mhlantla said.

Peter Dempsey, deputy CEO of the Association for Savings and Investment South Africa, said short-term debt is expensive and should be avoided because interest rates charged on this debt are high.

"Long-term debt such as a mortgage bond is funding what is hopefully an appreciating asset, like your home," Dempsey said.

"Once you have cleared your short-term debt, you should focus on repaying your long-term debt as quickly as possible. If you do, you will save yourself a lot of money over the long term."

Johan Borcherds, regional director at PSG Konsult, urged bonus earners not to spend all the money they receive. "They must put some money away for some unforeseen expenses during the course of the next year," Borcherds said.

 - Fin24

 

Comments
  • jay - 2011-12-09 08:27

    the banks have a cheek to comment here, the way they increase credit limits on your existing facility without questioning you first, and the way they phone you to offer personal loans and the like. thank goodness for the NCA as there have been to many victims to their unscrupulous lending behaviour.

      Lee - 2012-03-02 09:02

      Well, you do sign consent for this at inception

  • Gerald - 2011-12-09 10:26

    "Just come give it to us" says he who spent the yr pestering pple into that debt with calls and fake cheques. Banks!

  • Claire Neilson - 2011-12-09 13:19

    The banks have a real cheek here. Last week alone I recieved three seperate phone calls about increasing my credit limit, taking out an overdraft facility on my curent account and an enquiry as to whether I needed a personal loan. I am by no means a big earner, so I cannot understand why I would be offered a credit limit more than four times my salary. As an aside to this; I would really like to know whether it is in keeping with the CPA for major retailers to send store cards to people, like myself, who have expressed absoloutely no interest in opening an account. And let's not even start on the ridiculous bank charges. I was under the impression that the Competition Commmission had called for all banks in SA to review their pricing policies. I for one have seen no review - yet all banks can spend huge amounts of money on disengenuous and irritating print, radio and television advertising.

  • 100000454717327 - 2012-01-16 15:25

    Just like "STEVE from FNB" !

  • pages:
  • 1