5 Things Debt Free People Never Do

After paying off a mountain of debt, most debt-free people vow to never go back to that place ever again. And to ensure they stay debt free, there are a number of things they just never do anymore. Here are 5 things debt free people never do.

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Petrol Price to Rise on Wednesday

petrol price

On Wednesday, motorists will be hit hard with yet another petrol price increase of 12c/l, said the Department of Energy (DoE).

On the other hand, the price of diesel will drop by 2c/l for 0.005% sulphur and 1c/l for 0.05% sulphur. The price of illuminating paraffin (SMNRP) will drop by 9c/l, while the price of Liquefied Petroleum Gas (LPG) will drop by 5c/kg.

Average petroleum product price increases of around 40c/l for petrol and 20c/l for diesel internationally are behind fuel price adjustments. As well as the stronger rand against the US dollar.

These influences reduced the price adjustments by more than 25c/l, said the DoE.

Petrol prices rose more considerably than diesel prices because of a greater demand for petrol in Europe and the US, as the summer season approaches.

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4 Steps to Financial Security in a Troubled Economy

financial security

Taking steps to ensure your financial security is air-tight has become an urgent priority. As the cost of living climbs daily, the worst financial mistake you can make is to be in denial over the very real threat of over-indebtedness. In the wake of countrywide drought, aggressive inflation, an increase in fuel prices and an electricity tariff hike, an increasing number of South Africans are finding themselves in deep financial trouble.

Moreover, as inflation accelerates relentlessly, it looks as though the South African Reserve (Sarb) won’t be easing up on the interest rate hikes any time soon. South Africans simply cannot afford to be in debt anymore.

Consumers should brace themselves for the perfect economic storm. The cruel reality is that you will land up in hot water, unable to afford even the basics, if you don’t do something to reduce your debts post-haste. The silver lining is, if you are honest with yourself about your situation and take action straight away, you have a good chance of weathering the storm and coming out relatively unscathed.

Here are four steps to take at once in order to determine whether you are at risk and to help you lock down your financial security during these trying times.


Step 1: Get Real with Yourself

Often, the root of financial trouble is a simple case of denial or ignorance of what you are really spending. It’s always those small, seemingly negligible amounts leaking out daily that get you in the end. To get real with yourself, do a little experiment – track every cent you spend for a month. You can either use a budgeting app to do this or just keep a little notebook on you and jot down what you spend.

Most people find their expenses to be a great deal higher than they expected, after doing this little test, as their budgets don’t capture all of those small expenses. How can you craft an honest budget that will help you regain financial security, if you don’t know exactly what you are spending?


Step 2: Craft an Honest Budget

Financial advisors will tell you time and again, the importance of having a realistic, accurate budget cannot be stressed enough, particularly during troubled economic times. Consider the gauges on your car. Is it possible to get from A to B safely, without monitoring your speed and fuel tank? Problems would and do ensue, when driving fast and loose, without tracking these crucial gauges.

The same applies to budgeting. A budget is a gauge of your finances, so you can buy what you need to make it through each month safely. Monitoring how you spend what you earn will allow you to make the necessary adjustments to ensure you come out. This way, you can comfortably live within your means and achieve financial security.

A useful budgeting trick is to list the expenses in your budget in order of priority. High-priority expenses include your rental, mortgage instalments, insurance premiums, debt repayments, medical aid premiums and utility bills. These expenses are high priority, as not paying them will damage your credit score and result in legal repercussions, among a whole host of long-term negative effects.

Low-priority expenses include subscriptions, entertainment and clothing. The peace of mind that comes with knowing you will be able to food on the table is well worth cutting back on these trappings. Indeed, stripping away the excess can be quite liberating. After organising your budget, you will be able to determine whether your budget has room for any future price increases, which are inevitable, or whether you need make some.


Step 3: Eliminate Debt

Debt is a big threat to your financial security, as repaying it is a long-term, costly affair. The prime lending rate is currently at 10.5%. After two recent hikes, Sarb will only continue to raise interest rates as inflation surges unchecked. Whether you are teetering on the financial brink or are already in the red, now is the time to make eliminating debt a must, to ensure your financial security is not comprised.

Here are some tips to help you eliminate debt more quickly:

  • Prioritise – Just as you do with your budget expenses, list your debts in order of priority. Put high-interest, expensive debt, such as credit cards and store accounts at the top and low-interest mortgage bond payments at the bottom. Short-term debts have higher interest rates, which means they will grow quickly as time goes on, so you need eliminate these debts as soon as possible to avoid paying a lot more.
  • Negotiate – if you are struggling, approach your bank and credit providers and negotiate your debt repayments. Don’t just stop paying, as this will lead to serious legal action being taken against you. Your credit providers would far prefer you make lower repayments over a longer term, than not pay at all. Another option is to request a ‘payment holiday’ on your bond instalments. It’s possible to arrange for lower payments over a certain period of time or an extended term. Then, you can channel this extra money into your short-term, high-interest debts until they are settled, eliminating additional interest charges. You can also negotiate with your insurers to get your premiums down.
  • Cut Back – Cut out inessential expenses, like movie tickets, dining out and paid TV subscriptions. Channel this money into your debts. Remember, once your debts are paid off, you will have more money to play around with every month, as you won’t be making costly debt repayments anymore.
  • Extra Income – Consider selling belongings you no longer use, clothing you don’t wear anymore or jewellery you’re tired of. Use this money to put a dent in those debts. If you are struggling, search the internet for extra earning opportunities, they are everywhere – you have only but to look.
  • Savings – the interest charges on debt accumulate more quickly than interest grows on savings. So, it makes sense to use your savings to eliminate debt. Once your debts are paid off, you can really begin to save. Just be sure to resume saving or investing as soon as you can.
  • Downgrade – If you are tipping into over-indebtedness, downgrading can save you big time. Selling or trading in your car for a more economical, practical model can relieve a lot of budget strain. Just as moving to a flat with a lower rental will free up some much-needed cash.
  • Honesty – if you are in financial trouble, it’s essential to keep your partner and family in the loop, so you can work together to improve your situation as a team. Share the burden – two or more heads are always better than one at finding a solution. Being honest about what you and your family can and cannot afford to spend on will ensure that everyone understands the need to cut back. Moreover, your children will learn a thing or two about how to manage their finances in the future. Older children can contribute financially by taking on part-time work, provided it doesn’t interfere with their studies. Being honest about what you and your family can and cannot afford to spend on will ensure that everyone understands the need to cut back. Moreover, your children will learn a thing or two about how to manage their finances in the future. Older children can contribute financially by taking on part-time work, provided it doesn’t interfere with their studies.
  • Debt counselling – debt counsellors, like those at Reduce My Debts can negotiate with your credit providers to have your monthly repayments consolidated into one lower payment. This will give you some financial relief, not to mention stress relief – as your credit providers won’t be able to demand payments anymore or take legal action against you.


Step 4: Devise a Long-term Financial Security Plan

Once you are out of the woods, you need to secure your future finances by focusing on investing and saving again. You may be tempted to reward yourself, after accomplishing your hard-won goal of eliminating debt. But, don’t lose sight of the end game – financial security. Clearly define your long-term goals, i.e. a home, university for your children and a comfortable retirement.

Visualising these goals will discourage you from spending needlessly or slipping back into old, bad habits. Speak to a trusted financial adviser about devising and implementing a long-term financial strategy. This way, you’ll be prepared to handle any unexpected occurrences or expenses. More importantly, it will allow you to achieve your long-term goals of becoming financially secure and free of debt.

Sugar Tax: BevSA and Treasury to Meet

sugar tax
The proposed sugar tax on sugary drinks will be discussed by the Treasury and the SA beverage industry body when they meet next week, said a top official yesterday.

Finance Minister Pravin Gordhan proposed a sugar tax on sugar-sweetened beverages, such as soft drinks, energy/sports drinks, fruit juices, ice tea, vitamin waters, cordials, lemonade and squashes in his February budget speech.

The purpose of the tax would be to tackle obesity and improve public health, while raising additional revenue. The sugar tax would be implemented on 1st April 2017 if passed, though Gordhan did not specify how much it would be. It is predicted the levy will be 20%.

The Beverage Association of South Africa (BevSA) stated on its website that a sugar tax would be ‘discriminatory’ and would almost certainly fail. Members of BevSA include SABmiller, Pepsi and Coca Cola.

Executive Director of BevSA Mapule Ncanywa announced “We are meeting Treasury next week Thursday 21st and only after this meeting will we know the details of the proposed tax.”

Sugar Tax Hurts the Poor  

Ncwana said the sugar tax would only hurt the poor, as it had done in Mexico.

After the budget speech, Ncwana commented “We are extremely disappointed with the announcement of a discriminatory tax on sugar-sweetened beverages. If the minister’s indicated intention is to ‘curb excessive sugar intake’ then the evidence – from other markets that have taken this path and adopted such measures – indicates that this initiative will surely fail, as we have seen.”

Ncwana contended that sugar-sweetened drinks represent only a small part of consumers’ diets – below 10% of daily caloric intake. He argued that mounting data indicated that sugar taxes did not result in substantially reduced overall sugar consumption.

“The soft drinks industry has shown itself to be a willing and active partner in addressing the scourge of obesity and excessive consumption of sugar,” said Ncwana.

Health Foods Option Forum

The beverage industry has taken practical steps to educate consumers, after recent Health Foods Option Forum meetings. The forum includes more than 40 food and beverages industry players and the Department of Health.

BevSA said it would be actively promoting low and no-calorie soft drink options, marketing zero options to children specifically. The industry said it would also be conducting a national calorie intake study to gather real data about consumer behaviour.

This data would inform further initiatives aimed at reducing excessive sugar consumption.

Head of communications at Coca Cola, Zipporah Maubane said that South Africa’s beverage companies had agreed to react as an industry, under the title of BevSA.

“This is a sugar-industry matter and at this point we would prefer not to make any further comment,” said Illovo spokesperson, Chris Fitzgerald.

“With regards to the proposed tax on sweetened beverages, the sugar industry will engage closely with the government to understand its thinking and its intentions. The sugar industry promotes a healthy-balanced lifestyle and supports the fight against obesity,” said Fitzgerald

The Scourge of Obesity

Many countries have imposed a sugar tax on sweet drinks to curb obesity and raise additional revenue. In February, Britain announced it would be introducing a sugar tax on sweet drinks in two years’ time to abate the scourge of obesity.

Resolution Health Medical Scheme is on board with Gordhan’s sugar tax. Principal Officer of the scheme, Mark Arnold referred to the study conducted by University of Washington’s Institute for Health Metrics and Evaluation. It revealed that 70% of women and 40% of men in South Africa were obese or overweight.

“With concerns growing over the obesity rate in South Africa, and many associated non-communicable lifestyle diseases on the rise, the notion of a tax on sugary drinks is a welcome development,” said Arnold.

Hefty Fuel Price Hikes to Hit Consumers in April

April Fuel Price Hike

Ongoing fuel price hikes will snowball, as a 30c-per-litre fuel levy hike is lobbed on. This will make for a very large hike in April says the Automobile Association (AA).

The 30c levy included, petrol will soar by +/-83c per litre and diesel by +/-95c per litre warned the AA yesterday, responding to the Central Energy Fund (CEF) releasing unaudited month-end data.

Even though the rand has strengthened against the US dollar over the last couple of weeks, the fuel price hike will outstrip these gains.


Oil Prices Climb

Moreover, as oil prices continue climbing, South African consumers will be hit with ongoing fuel price hikes. The rand may deteriorate as a result, applying even more pressure. Add to this the possibility of a ratings downgrade before end 2016, and consumers are in for a rough ride with ever more fuel price hikes.

The government has done us no favours by hiking the fuel levy, on top of the monthly adjustment and rising oil prices. A month or so back, oil cost $30 a barrel. It has since soared to +/-$40, which is a large percentage increase. The rand is a long way off from recovering the losses it’s made and remains relatively weak. This, of course, means oil costs a lot more for South Africa.


High Cost of Living

This latest fuel price hike will lift the high cost of living even further out of reach. Households have recently taken a string of knocks, with interest rate hikes, electricity tariff hikes, tax increases and food price increases to name but a few.

Iran will be producing an additional 1 million barrels of oil daily, but this does little in the way of bolstering demand in a slow global economy.

The only answer seems to be that of living within our means. This is something the government itself needs to learn. Just because you would like something new, doesn’t mean you should go out and get it on credit. Especially now, as yet another interest rate hike looms.

How to Exit Debt Review

Then and Now

The National Credit Amendment Act (NCA) introduced in March this year specifies when someone can exit debt review, if they wish to do so.

Before then, you had to settle all of your unsecured and secured debts as agreed to in the new repayment plan. This meant you had to stick to the monthly instalments, interest rates and terms, as negotiated by your debt counsellor and credit providers.

It also meant you had to wait until you got a clearance certificate before you could terminate or exit debt review officially. If your home loan was included in your debt review application, you would also have to settle this in full before you could exit.

Now, you are free to exit debt review, even if you haven’t settled your bond in full, though your mortgage payments must be up to date. Also, you must prove to the court that you are in a stable financial position, if you want to exit debt review.

If you start earning more and would like to exit debt review that is your prerogative. But, only if you haven’t missed any of your payments up until that point. Though, remember, that once you withdraw from debt review, your monthly payments will go up again and the original repayment term will stand.

How Do I Exit Debt Review?

Only a court may rescind your debt review order or grant you an order declaring that you aren’t over-indebted anymore, as your debt counsellor doesn’t have the legal authority to do so. In this way, you will have legally exited debt review!

Your debt counsellor will then issue a 15.W to your credit providers, notifying them of your withdrawal from debt review.

What Are My Rights?

You may be hesitant about entering debt review because it means handing money over to a debt counsellor, who then hands it over to a Payment Distribution Agency (PDA). Meanwhile, you’re wondering if your credit providers will actually get the money.

The NCA allows you to make payments directly to your credit providers, if you would prefer to do this. The National Credit Regulator (NCR) states that if you choose to make direct payments to your credit providers, it doesn’t count as non-cooperation. As such, your debt counsellor can’t suspend your debt review services.

Tip: When applying for debt review, look out for a Form 16. Signing this form will mean committing to either paying via a PDA or directly, so make sure you know what you’re agreeing to before signing it.

After Exiting Debt Review

After you’ve made the big exit, you’ll need to send proof of payments to your debt counsellor on a monthly basis, so they can keep these on record.

Lastly, you must send proof of settlement letters from your credit providers to your debt counsellor to get your clearance certificate.

Tribunal Fines Nelspruit Lender R1 million

After finding Nelspruit lender, Akudle Kutshiyele guilty of breaching a number of National Credit Act (NCA) regulations, the National Consumer Tribunal (NCT) fined it R1 million.

The fine was imposed after the National Credit Regulator (NCR) conducted an investigation into Akudle’s lending practices. The regulator uncovered that Akudle neglected to perform affordability assessments before granting credit.

The lender also retained borrowers’ IDs and bank cards as collateral. Furthermore, after non-payment of yearly fees resulted in a lapsed registration, the lender continued to illegally extend credit.


Serious Contraventions

NCR Manager of the Investigations and Enforcement Department, Jacqueline Boucher said that “Continuing to trade after the lapse of their registration due to non-payment of registration fees is a serious contravention of the NCA.”

The tribunal is allowed to impose a fine of 10% of the yearly revenue or R1m, according to the National Credit Act (NCA).

“The fines are based on the seriousness of the contraventions as well as the size of the business. In this instance, the fine imposed supports the NCR’s contention that the contraventions were serious,” explained Boucher.

The NCR are unaware of how big Akudle’s loan book is or how many borrowers it serves. The lender did not provide updated yearly financial statements. All credit providers are required to register with the regulator and adhere to the Act. The amended NCA no longer exempts smaller lenders from having to register.

Akudle has a month to pay the R1m fine.


Justice Khosi

“We cannot speculate on their ability to pay. Should they not adhere to the orders of the NCR, the NCR will take steps to enforce the judgment, which has the same standing as an order of the High Court,” said Boucher.

Justice Khosi is the self-proclaimed managing director of the lender. Khosi denied any knowledge of the fine and said the business no longer existed, as he was in financial trouble.

Khosi failed to appear at the tribunal hearing, however he was sent the judgment, Boucher disclosed.

The NCR would be carefully observing credit providers’ compliance with the amended Act, stated Boucher.

In February, 13 credit providers countrywide were referred to the NCT by the NCR for numerous contraventions of the NCA. These violations included reckless lending and overcharging of interest.


Investigations, Raids and Fines

During the initial six months of the 2015 financial year, the NCR referred 44 cases against lenders to the Tribunal. This resulted in consumers being refunded millions of rands said Nomsa Motshegare, the CEO of the NCR on Tuesday, March 15.

Some of these cases involved unlawful garnishee orders on employee’s salaries to pay back debts. Consumers were refunded R67 million in total, after being overcharged for insurance coverage over the term to end-September, said Motshegare. This was at a briefing on the regulator’s activities to Parliament’s trade and industry portfolio committee.

Lewis Stores and Edgars are among the big retailers and lenders that the NCR has investigated and raided.

The Tribunal fined 9 credit providers a total of R4.4 million. While social grant and bank cards, and IDs that were unlawfully held by lenders were seized.

“Several credit providers were arrested in raids conducted in the Western Cape,” said Motshegare.

The NCR focused its investigations on occupational disability and retrenchment insurance sales to pensioners and social grant receivers. These consumers cannot claim on this type of insurance and should not be paying premiums on it. Other contraventions included reckless lending, overcharging of credit life insurance, default judgments obtained outside of the debtor’s jurisdiction, deceptive advertising and excessive fees.


Joburg is Illegally Chasing Prescribed Debt!

The Acts

The City of Johannesburg (COJ) is violating the Consumer Protection Act (CPA) and the Prescription Act (PA) by chasing down the prescribed debt of thousands of consumers.

As a rule, the CPA is applied alongside the National Credit Amendment Act (NCA). However, in cases where the CPA and NCA contradict one another, the act that protects and benefits the consumer most will apply.

Whereas, the NCA refers to the Prescription Act, without altering it. The Law of Prescription provides debtors with a defence against credit providers, who fail to take action against them.

Prohibited Conduct

In March this year, an amendment to the CPA came into force, prohibiting credit providers from attempting to recover debts over three years old, classified as prescribed debt under the NCA.

According to the NCA, if credit providers attempt to collect prescribed debt from consumers, as the COJ are doing, they stand to be fined 10% of their annual revenue, which, in this case, would be R1 million.

Owing to the new Credit Control and Debt Collection Policy introduced last month, COJ claims it may attempt to collect debt attached to property, even if the debt has been settled and a clearance certificate issued.

The DA Reacts

On the other hand, The Democratic Alliance (DA) contended that this was illegal.

Vasco da Gama, the DA’s Joburg caucus leader argued that COJ were prohibited from pursuing accounts in arrears for more than three years, as enforced by the Acts.

Da Gama disclosed that COJ is now cutting off consumers’ water and electricity to strong arm them into debt agreements, demanding they pay a 50% deposit and monthly instalments over 60 months.

Da Gama revealed, “We are having complaints from all over. People of Ennerdale are signing a petition against this. For 15 years, the city did not collect arrears; now some are in debt for hundreds of thousands of rand. They can’t afford to pay even half the amount owing.

“They should write off arrears and install pre-paid meters. The city is breaking the law. From March, it was supposed to have purged its accounts of all debt older than three years. This includes interest, disconnection and reconnection fees and legal fees.”

Petrol Price to Drop But Outlook Still Grim

The Last Petrol Price Drop for a While

Consumers can look forward to a 69c/litre drop in the petrol price and a 50c/litre fall in the diesel price on Wednesday morning (3rd September, 2015).

Although we should be grateful for any economic relief whatsoever right now, no matter how short-lived or slight, this petrol price decrease does little to improve our current circumstances or the bleak outlook South African consumers’ face.

Economists say that, if it weren’t for the Rand falling to an all-time low of R14 against the US dollar last week, consumers would’ve enjoyed as much as a R1.00 decline in fuel prices this week.

Secondly, the Rand is expected to remain at risk, as crude oil prices continue to rise. In turn, this means we probably won’t be seeing any subsequent reductions in the petrol price for a while.

Consumer Debt, Sluggish Growth and Drought 

Other causes for alarm include escalating consumer debt and the GDP (Gross Domestic Product) contracting by 1.3% last week, as a result of the weakening Chinese economy. GDP can be defined as an all-inclusive measure of the goods and services a country produces.

In addition, food prices may very well rise, owing to drought in SA’s major farming regions. As the endless list of reasons to get debt free and start saving, before it’s too late, grows ever longer.

No Strategy Despite Imminent Crisis

Moreover, a gold and platinum sector strike looms close, while the manufacturing sector has formally entered a recession.

Despite the Rand clawing back up to R13.3097 against the dollar on Friday, drooping commodity prices persist, dampening any prospect of our economy making a comeback.

Analysts believe Eskom’s power cuts and President Jacob Zuma’s misgovernment of our country are the biggest culprits behind this imminent economic crisis.

Worst of all, the government doesn’t appear to have any strategy in place to combat any of these serious concerns.

Will Sarb Hike Interest Rates?

As September’s monetary policy meeting draws near, the SA Reserve Bank’s (Sarb) decision becomes harder and harder. Sarb has to consider not only the volatility of the currency, but also the impact that a repo rate hike may have on our bruised economy at this stage.

Moreover, higher interest rates will undoubtedly result in consumers getting even stricter about cutting back on spending, in order to maintain even the most basic standard of living.

Consumers Must Settle Debts and Save

Investors will be frightened off by low consumer confidence, sensing deep-rooted decay in our structure, inescapably resulting in a devastating currency crisis.

Now, more than ever, consumers should be hunkering down and battening the hatches, in preparation for a perfect economic storm. One simply cannot afford to be in debt in such troubled economic times. So, get into survival mode, pay off your debts and then begin to save for the unthinkable – soon to become a harsh reality.


Homechoice Curbs Debt with Stricter Lending Criteria

Less Room for Arrears

To protect itself and its clients from the afflictions of our defective economy, Homechoice International, the global furniture chain, has decreased the amount of its average loan offering. In addition, the company is implementing a strategy to bolster its cash collections, while also narrowing its lending criteria to high-risk consumers.

CEO of Homechoice, Shirley Maltz stated that they would no longer be mailing their monthly catalogue to credit impaired consumers, so as not to encourage indebted consumers to accumulate more debt.

Maltz also advised that recently they only approved 45% of applicants for credit, so as to rule out any possibility of reckless lending. Though, she acknowledged they’d ordinarily grant credit to +/80% of their existing clients, naturally taking affordability into account.


Against All Odds and Ends

Irrespective of stricter lending criteria, Homechoice asserted that sales were up by 10.6%, ascribing its unswerving success to “the benefits of continued product innovation”.

Though the company’s mail orders suffered because of the South African Post Office’s strikes, throughout the past and present year, its online orders and call centres thrived. The retailer’s quality homeware merchandise – ranging from bedding to kitchen utensils – is available in five countries, where the brand enjoys preference and credibility.


Lower Loans, Longer Terms

Homechoice lowered their average loan amount of R8 466 in June last year, to R7 804 in June this year. The company also extended their average loan repayment term from 18.9 months to 19.6 months.

The retailer delivers their credit services via loan provider, FinChoice. Homechoice is focusing on providing qualifying customers with small, short-term loans, with a maximum term of 36 months, where only 6% of loans are paid off over the maximum term. The business will also be adding insurance to their array of finance products in 2015.


Setting the Example

Homechoice paid out 22% more on loan disbursements this year, bringing the total up to R542 million. Existing customers comprised 7% of borrowers. The company has a total loan book of R1.9 billion, with 9% impairments and 18% provision for doubtful debts.

Clearly, Homechoice’s decision to focus on cash collections and tighten up lending criteria couldn’t have been implemented at a better time, considering the distressing state of the economy and rampancy of reckless lending. Hopefully, other companies will follow suit.