SAVING and spending money correctly is very important in
order to be financially healthy. Sometimes it’s not just the big things such as
paying for your car or house that consume your money, but it is unnoticeable
things such as bank charges that are taking up most of your money.
Meldah Lishiba, a banker based in Johannesburg, says it is
important to open a bank account that meets your needs. “Visit your nearest
bank and find out more about the account you have with them. Find out what the
charges are and if they charge per transaction or you pay a monthly fee and
from there you can choose or switch to an account that best suits you,” she
says. Meldah also advises that you shop around different banks to find an
account that is best suited for you. Financial advisor, Simonne Swart, says you
should honour your debit orders because should they bounce, it is not just the
bank that will charge you, but the service provider too. The bank will charge
you because the payment bounced and the service provider will also charge you a
fee for late payment. “An alarming number of individuals default on their
financial obligations or reverse debit orders when strapped for cash,” she
Living on your credit card is financially unhealthy because
it means you are living beyond your means. If you are buying essential items on
credit, something is very wrong with your budget. Simmone advises that you
should understand the difference between needs (essential items) and wants
(non-essential items). “A credit card can be addictive when you find yourself
swiping as though you have money,” she warns. However, some banks do not charge
interest on your credit card if you pay back the money within 55 days of using
the money, be smart and use this option if it is available on the credit card
you use. “Most clients do not know that they can reduce their credit limit that
has been given to them by the bank. For example the bank will say you qualify
for a R40 000 credit which can sometimes tempt you to spend more than you need
to. Reducing your credit limit helps you not to spend too much on credit,” says
SMALL BAD HABITS
Many people are guilty of going to the mall to get one
thing, but come back with a whole lot more than what they intended to buy. “Make
use of a shopping list when you go shopping to avoid buying unnecessary things
and forgetting to buy what you are there to buy,” says Simmone. She also
suggests that you do not go to the mall for just one item. “I keep a list of
things that I need on my fridge. If there are less than 10 items on the list
then I am not going to the store. I will only go if there are 10 items or more.
This truly teaches you discipline,” she says.
Simmone says most clothing accounts charge high interest
rates and recommend a minimum instalment that only pays off interest fees and a
tiny portion of the actual balance owed. This means you end up taking years to
pay for something you could have bought by saving for it in a few months. “Most
people pay club fees for a club magazine that they seldom read and discounts
that they rarely use,” says Simmone. Some accounts are six months interest
free, which means if you pay your debt back in that period you will not be
charged interest, this is something to consider if you feel you need a clothing
account. With some other accounts the service provider will charge you interest
upfront after your purchase and will not generate interest thereafter. Simmone says the biggest challenge with
clothing accounts and any form of credit is that you begin to believe that you
have extra cash to spend when you don’t. Once you buy something on credit, you
are obliged to pay that monthly instalment whether you like it or not. If you
don’t, most creditors will relentlessly hunt you down until you are blacklisted
and your credit profile is ruined for years.
RENTING VS BUYING PROPERTY
Simmone says renting and buying have benefits and shortfalls.
“Buying a house could be one man’s cup of tea while renting would suit the
lifestyle needs of another,” she says.
Simmone says you should only buy property if:
are looking for long-term security, ownership and potential growth in personal
wish to sell for a potential profit at a much later stage.
wish to have control over your living space.
wish to rent it out to generate an income. However, many do not think of the
full extent of the consequences of home ownership.
There are challenges such as:
huge financial responsibility that is “set in
stone” for the long term.
¦ Extra costs which are highly
underestimated by most first-time home owners such as rates, taxes, regular
maintenance and insurance.
of mobility. Since a bond is at least 20 years
for most people, a home owner can’t just up and leave once
the lease is over like a tenant can.
WHY YOU SHOULD RENT
You might want to travel the world rather than pay for a
large house, especially in younger years. You should rent a property if:
do not want to stay in one place for too long.
have chosen a career path that allows for the opportunity of regular job
want to live in an area where you may not otherwise be able to afford to buy.
want to save on insurance and minimise extra costs. A tenant only needs to
cover home contents since they are not responsible for the maintenance of the
property and possibly, electricity and water, if not already included in the
According to Simmone, renting has its shortfalls, such as restrictions of lease agreement and
rules set out by the landlord. Simmone highly suggests that you need to be
honest with yourself about how much you can afford. She also suggests that you
have at least six months of rent or bond instalments saved up before starting
the process of renting or purchasing a property.