We need to have control over our money to ensure that we have financial wellness and balance in our lives. We need to manage it properly so that it does not manage us. Money management begins with knowing where your money goes. Good money management revolves around making choices: living within your means, saving for rainy days, managing your credit, and repaying monthly instalments. Having too much debt can negatively impact your finances. It is therefore very important to know what you can do to manage your payments and debt effectively.
Here are a few pointers to guide you when controlling your money:
You must ensure that you adhere to the repayment terms that you agreed to when you signed your contract. Many credit providers have enabled customers to pay their bills securely and conveniently in the following ways.
Financial stress can stem from being in debt, not earning enough money coupled with the increasing cost of living and unforeseen expenses which had led to debt being increased
Apart from budgeting, money management, and personal finance lessons, you can reduce your financial worry by contacting your credit providers when you encounter difficulty in making repayments. Your credit providers will try their best to accommodate your situation which in turn will enable you to focus on other important areas of your life and relax, knowing you have a plan to handle your financial situation.
Here are a few ways in which your credit providers and financial service providers may be able to assist:
|Payment arrangement||Contact your credit providers if you cannot afford your monthly repayments because of an emergency or other personal reasons. This should be done before you default on any payment; if you wait until after you have defaulted, that reflects bad behaviour and will negatively impact your credit score. This payment arrangement works well if you are experiencing a temporary problem.|
|Rescheduling||A longer-term solution is rescheduling. You can ask your creditor to reduce your instalment by extending your term or lowering the interest rate, or both. This will then increase interest and the total cost of the loan but will make it more affordable to repay every month.|
|Claim on insurance||If you have credit life insurance for your loans, make sure that you act quickly in the event of death, retrenchment, disability, short-term loss of income, or dismissal. Refer to Module one to better understand what is Credit Life Insurance.|
|Payment break||Find out from your credit provider if they can give you a payment break on your loan to recover from your short-term distress.|
|Loan Consolidation||Debt consolidation entails taking out one new loan to pay off many others. Usually, the consolidator will obtain settlement quotes from your other creditors and will settle these debts for you. Many people use this option because they prefer to have one loan to repay instead of many.|
|Debt counselling||When your monthly household expenses exceed your net available salary prior to any debt repayments, you are considered to be over-indebted. This also implies that affordability is not sufficient to repay any consolidation loans. Debt counselling is done by an authorised debt counsellor and is a process of assisting consumers that are experiencing debt-related problems through budget advice, restructuring of payments, negotiating with credit providers on their behalf, monitoring their payments, and providing after-care services. Debt counsellors are registered with the National Credit Regulator.|
|Debt Administration||This is where you get a debt administrator to arrange to pay off your debts. The administrator will apply to the court to have some of your income set aside for basic living expenses, and the rest will be used to pay off credit providers. You will need to determine how much you have to repay your debt each month, and you will pay this amount to an administrator who will make a distribution payment to each creditor every three months. To qualify, your total debts should not be more than R50 000.|
|Sequestration||Sequestration is the remedy for an over-indebted consumer. It is an effective solution if it seems that you will never be able to pay off your debts. You can apply to a court to be sequestrated if you have sufficient assets to sell to ensure that your creditors will receive at least 10 cents for every rand that you owe.|
|Voluntary surrender of goods||This process is where you choose to surrender your goods, which you have bought on credit. For example, if you have bought a vehicle on credit, you can choose to give the vehicle back when you are unable to make payments. The retailer will sell it and you will only be liable for the difference between what you owe and the amount recovered from the sale of the vehicle.|
There are regulations that guide your rights in relation to credit. You should, at a minimum, be familiar with the National Credit Act, the regulations, and your rights. Being aware of your rights and the responsibilities of creditors, lenders, and other businesses in the credit industry will help you know how to properly respond to issues that arise.
Here are some notable rights and responsibilities that you should be aware of:
Take a deep breath, sit down, and take a good look at yourself and your current financial situation. You need to write everything down in order to have a clear and true picture of your areas of concern and your priorities. You can then use the following recommendations to ease your financial stress and achieve financial wellness:
Remember that there is no easy way to get out of debt. You must be committed to putting in hard work, dedication, and willingness to change are what you need to pull through. Learn more about your money plan in our next module, Your Money Plan.