How to Craft a Good, Old-fashioned Airtight Budget

It’s The Little Things That Count

When it comes to crafting a budget, you may just be so blinded by hip, tech-savvy, buzz-word-infused jargon that you’ve altogether forgotten the robust, workable basics – the unbreakable classics. Here are some time-old tips on how to go about drawing up a good, solid budget.

First, mull over this: how do you know you’ve missed the target, if you haven’t even got one?

Whether you scribble it on a napkin or chart it out on Excel, your budget will be of little value, if you don’t have precise numbers. In order to craft a worthwhile budget, it’s essential you calculate all of your expenses, down to the premium cup of coffee you secretly treat yourself to every Friday.

The reason being, this is the only way to get a bigger-picture perspective of the in-comings and outgoings of your money.

Secondly, you need to give your budget a monthly nip-tuck to ensure it remains relevant.

Your needs may change with the seasons, unpredictable economic tides, medical emergencies crop up, the petrol price drops, your cellphone is stolen, your long-lost, great-great aunt leaves her fortune to you, etc. As such, that budget of yours needs to be tweaked at least once a month – a small price to pay for financial security.

Divide and Conquer

Divide your expenses into two categories – variable and fixed expenditure.

Fixed expenses are automatically debited from your account, such as your bond repayments, insurance premiums and car finance instalments. Remember to factor in your pension fund and retirement annuity contributions if applicable.

Get comfortable with the fact that you can’t play around with your fixed expenses – there is absolutely no wiggle room for cutting back on these.

On the other hand, variable expenses are a different kettle of fish. These supple, bendy expenses have the capacity to make or break a budget, as they will dictate any changes you need to make from month to month.

Here’s where the genuine, real-deal budgeting part comes in – you need to record, monitor and bend these costs to your will. Variable expenses comprise everything from groceries to leisure pursuits, toiletries and impulse buys.

Cash Clairvoyance

Carry a pocketbook and jot down your cash purchases as you go about your day. The chronicles of your disappearing bank notes will endow you with second-sighted money sense. The cash-gushing leaks and cracks will at once light up, as if you’ve decoded the matrix, allowing you to pick them out and seal them up.

Printing out your bank account statements should not be confused with crafting a pensive, authentic budget.

Your pocketbook and statements are raw materials from which you can craft a meaningful budget. By plotting out a clear, illuminated path forward, you’ll be able to taste your financial goals, while sticking to the stepping stones will become second nature. With the fundamentals in place, the rest will follow and fall cosmically into place, enabling you to make it rain rands!

 

Sona Update – Real Progress or Empty Promises?

Drawing Blanks

Senior Cabinet Ministers in tow, President Zuma gave the country a predictably vague, flowery Sona update on the progress of the 9-point plan yesterday, 10 August, 2015. The media briefing came after Zuma hit a big, fat blank upon being questioned about the South African economy, job creation and illegal cash flow, in Parliament last week.

To obscure his universal cluelessness, the President had the Minister of Finance, Nhlanhla Nene, the Minister in the Presidency, Jeff Radebe, the Minister of Economic Development, Ebrahim Patel and the Minister of Rural Development and Land Reform, Gugile Nkwinti acting as answerable human shields, in case journalists fired off questions he would invariably need to dodge.

Unintended Consequences 

True to his slippery nature, shortfalls were dismissed as ‘unintended consequences’ or blamed on the ‘global climate’, without ascribing a hint of culpability to government defectiveness or leadership incompetence.

Overall, the Sona update proved rather devoid of newsworthiness, being primarily composed of unfulfilled promises and wishy-washy musings.

Ambiguous Admissions

Though no-one blinked an eye after discovering economic growth was not where it should be, an admission alone by the president was enough to raise brows, as Zuma acknowledged ‘We committed ourselves to a 5% growth rate by 2019. The 1.5% economic growth rate attained in 2014 is a distance from that NDP ambition.’

Zuma’s Sona update even included an acknowledgment that load shedding was currently weakening economic growth by almost 1%. Nonetheless, characteristically ambiguous claims ensued, such as ‘“substantial progress has been made in resolving the energy challenge” and “the nuclear build programme is at an advanced stage of planning and the procurement should be concluded within the current financial year.”

Immigration Regulations Flop 

The most newsworthy Sona update came in the form of an announcement of the establishment of an interministerial committee (IMC) on immigration regulations, indicating that new hotly contested immigration regulations had inevitably backfired.

Debt Review Programme

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The Debt Stranglehold

If your debts have you in a stranglehold, you may have considered entering a debt review programme to get some relief. Particularly if your creditors have threatened to take legal action against you. Entering a debt review programme means your creditors cannot take you to court.

Debt review involves consolidating all of your debts and paying one lower debt repayment every month to a payment distribution agency. You may be in a situation, where you only take home a fraction of your salary, after creditors make their deductions. But, after this intervention, you will feel relief within a few months, and will take home more and more money.

Sleepless, Ashamed and Over-Indebted

Over-indebted people can’t sleep at night because they are worried about how they will pay for the most basic of needs, such as groceries for their families, after their monthly instalments are debited off their accounts. They feel ashamed at having to ask family members, friends or colleagues for loans, and get depressed as a result.

With a debt review programme, you will sleep safe and sound, knowing you can afford to put food on the table.  No more will you be forced to endure the indignity and embarrassment of pleading for money

The Relief and Protection of Debt Review

Even if your house is on the verge of being repossessed, a debt review programme can protect your assets from creditors. You will remain the owner of all of your assets. You are not thinking clearly while over-indebted. You may panic and make irrational, impulsive decisions that worsen your situation and put you, your family and your finances in danger.

During debt review, you will not be allowed to take out any more credit. This will help you by preventing you from burying yourself even deeper in debt, which is something a lot of debt-stressed people end up doing.

You Can’t Put a Price on the Debt Free Life

Not being able to go out for overpriced meals at restaurants or to buy fancy things you don’t need on credit will allow you to regain stability. This is a big advantage of debt review that many people don’t recognise. You will begin to appreciate what you have and feel freer every day.

You will only be able to go out and get a new credit card at the bank, once you have paid off all of the debts that you owe now. By this time, you won’t need a credit card because you will have learnt to live without it, so you probably won’t even want one. Living a debt free life is more rewarding than anything money can buy.

 

Voluntary Debt Mediation

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The Debt Repayment Risk

As a rule, if you’ve fallen into 3 or more months of arrears and don’t know how you’re going to afford any of your upcoming debt repayments, you should really look into voluntary debt mediation. Credit debt can be a useful means of improving your living standards, a powerful wealth creating tool, or even a lifesaving mechanism, in the case of a medical emergency.

However, unfortunately, it’s impossible to predict with 100% certainty whether or not you’ll be able to meet your debt repayment obligations without a doubt in the upcoming years, as this would require nothing short of an enchanted crystal ball or supernatural psychic powers.

Risk analysis allows microlenders to roughly gauge whether or not you will be a high-risk client, who is likely to default or fall into arrears. Even so, as with most sciences, there are always exceptions.

A Change in Personal Circumstances

A change in your personal circumstances can diminish your ability to pay back your debts, such as the breadwinner of a family passing away, creating unforeseen funeral costs and mouths to feed.

A loved one may fall desperately ill and not have medical aid, creating unexpected medical bills. Your spouse may serve you with divorce papers and, as such, you may need expensive legal representation. You could be retrenched from work and accordingly be unable to cover your monthly debt instalments, on top of your basic living costs.

As you can see, there are many factors beyond your control that may lead to you falling into arrears or being unable to maintain your debt repayments. However, there is one thing that you can do to make sure you are able to rectify your situation as speedily and painlessly as possible, if at all – take immediate action, before you creditors take legal action against you.

Contact Reduce My Debts for Voluntary Debt Mediation

Firstly, we’ll restructure your budget to take your higher monthly living costs and/or lower income into account, or whatever the change in circumstance may be. We will then calculate the amount you can practically contribute towards your debts each month, without it cutting into the money you need for essentials.

Subsequently, we’ll propose new terms and a reduction in your monthly debt payments to your creditors. Along with lower monthly instalments and interest rates, these new terms will also include your creditors agreeing to not take legal action against you.

A Non-Legal Route

Voluntary debt mediation is more affordable, as it doesn’t require any court proceedings, which tend to make things very expensive. However, debt review legally prevents creditors from taking legal action against you, if you’re over-indebted.

Whereas, voluntary debt mediation is more suitable for those who are experiencing a temporary cash flow problem, and thus need a little professional assistance to prevent them from becoming over-indebted or to help them regain full control of their financial affairs.

The Consumer Condition – Old Debt, Prescription and the Collectors’ Chase

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Pressured by Debt Collectors to Pay off Old, Inflated Debts

You may have heard of the new regulations regarding prescribed debt under the National Credit Amendment Act, which came into effect as of March 13. But do you fully understand the implications thereof?

According to the Prescription Act, it’s illegal for companies to sell prescribed debt, or to collect it. More importantly, it also means that you, the consumer are no longer required to raise the defence of prescription or even be aware of it, in order to avoid paying a company or collector.

If debt collectors are leaning on you for an old debt, which you suspect has prescribed, as you have not made any payments towards it, for the past 3 years, consider the following:

Invaluable Advice on Dealing with Persistent Debt Collectors

  • Do not acknowledge that the debt – by all means don’t express that you owe anything aloud and DON’T SIGN anything.
  • Do not make any promises to pay the debt – this would make you liable to pay the amount demanded, including years of collection fees and interest.
  • Do not confess to having received a summons, as a way of getting collectors off your back. Many consumers simply cave and sign a document they don’t understand, due to coercion and intimidation, especially if they are unaware of their rights.
  • Don’t take cession of the debt – once again, don’t sign anything! You may just be consenting to a garnishee or emolument attachment order, which allows the collector to compel your employer to deduct payments from your salary every month.
  • Remember, a SA court judgement of debt, government debt (taxes, municipal debt, TV licenses etc.) and home loan/bond debt only prescribe after 30 years.
  • If you have signed a surety, making you the co-principal debtor and obtain a judgment, you could be held liable for the debt for a term of 30 years.
  • All other debt, related to credit agreements, such as car finance, credit cards, store or retail accounts, etc. prescribes after 3 years. This debt makes up 94% of all SA debt!
  • If you’ve already acknowledged the debt in some way, prescription may still apply, but only if you are a minor, live outside SA, are married to or in business with the creditor/collector, or the debt is related to arbitration or a claim against the estate.
  • Hold your ground, screen their calls, don’t call back or respond to their SMSes. Even better, contact Reduce My Debts immediately for assistance.

Chasing Old Debts  

The intended purpose of the Prescription Act was to motivate creditors and collectors to collect debts, in order to resolve these matters quickly. Conversely, many collectors and credit providers chose to capitalise on the thriving ‘business of chasing’. As follows, they put off collections, only to stalk consumers many years later and strong-arm them into paying off old debts, bloated by interest and collection costs.

Apparently, the chasing business is still alive and well, according to numerous consumer reports. Many consumers, who are still unaware of how the new amendment really works, continue to give in to collectors.

Again, it’s not up to the consumer to raise a prescription defence to get out of paying old debts.  Collectors are acting illegally by requesting that you pay a prescribed debt to begin with.

A Prescribed Scenario 

Imagine you are contacted by debt collectors claiming that you haven’t paid for a purchase on a retail account, which you recall having paid off 5 years back.

However, despite living in the same house and working at the same company all these years, the collectors have not contacted you up until now, suddenly claiming you owe payments on the account, along with interest and collectors fees.

Under the National Credit Amendment Act, you are not obligated to pay off this debt, even if you are not aware of prescription. The onus is on the retailer or credit provider to prove that you owe this money.

Even if the collectors attempted to collect the debt from you before this date, legally the retailer is required to instruct the collector to close the debtor’s file and desist from pursuing payment, if the debt has prescribed.

A Case in Prescription

On the other hand, let’s say you were contacted by debt collectors late last year, claiming that you owed money on a car that was repossessed 8 years ago.

You naturally assume that the sale of the car covered your outstanding balance, as you weren’t contacted at all thereafter to make any further payments. Despite having the same contact number and an unaffected credit record.

The collectors attempt to contact you, leaving urgent messages on your voicemail, without really clarifying the nature of the debt. You don’t, however, call them back, avoiding their calls and texts well beyond March 13, 2015.

Simply refraining from paying the debt does not prove it has prescribed. However, if the company fails to provide any proof of you acknowledging the debt, having made any payments towards it, or receiving a summons in relation to it, under the law the debt has prescribed.

As long as you don’t take cession for the debt, it essentially expires. And remember, it’s not your responsibility to raise a prescription defence, this rests with the credit provider and their collectors. Your file ought to have been closed after March 13 and all contact stopped. If this is not the case, we strongly advise you contact Reduce My Debts for help today.

SA Consumers and Rental Companies Opt for Used Cars

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More A to B for Your Buck

As more and more studies reveal how consumers and rental companies are turning to used cars for financial relief, the extent of the disparity between the average disposable income and the cost of living becomes ever clearer.

The price of a new car has gone up 4.9% from last year, making buying a brand spanking car unaffordable for most. Accordingly, this can be seen as a distinct warning sign that businesses and consumers are finding expenses increasingly unmaintainable in South Africa.

Rental About Used Rides

Tourist figures have dropped, causing rental companies to stretch the lifespan of their rental cars, instead of replacing them at a certain point. Wesbank affirmed that the rental market has dropped 19%, as compared to May.

This reduction in car sales can possibly be attributed to low consumer confidence. Furthermore, experts warn that, before the end of next year, we can probably expect interest rate hikes.

Year on year (y/y), there has been a 6.6% (4.8% in total) monthly decline in new car sales, as per the National Association of Automobile Manufacturers of South Africa (Naamsa).

Second-Hand is First Choice

Despite being under incredible financial strain, y/y increases of 11.8% in credit application forms, 9.3% in new car applications and 4.9% in used car applications show that consumers clearly desire to purchase vehicles.

However, used cars are evidently preferable these days, as the cost of buying a new car is simply out of most individuals’ price range in the current economic climate.

 

Debt Mediation vs. Debt Management

Debt Mediation vs. Debt Management

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When the NCR realised that voluntary debt mediation prejudiced consumers by undermining the NCA and professional debt management, they amended the act to show that they were not in support of this method.

The aim of debt management is to protect you, the consumer from credit providers (CPs) who lend you credit when you are clearly not in the financial position to pay it back.  In such cases, the credit agreement is referred to as reckless lending, which is unlawful under the NCA, as the CP failed to follow its regulations.

Debt management protects you from the unlawful repossession of your assets or property and gives you the opportunity to take legal action against the CP, so you can redress the wrongs committed against you, the consumer.

Furthermore, CPs often hire debt collectors on commission to collect those debts from you. Many of these debt collectors threaten, intimidate and harass consumers in a highly unethical and unprofessional manner, in order to get those payments from you.  Another benefit of debt management is that your debt counsellor will protect you from such debt collectors, by dealing with them on your behalf, which is a huge weight off your shoulders.

If you are experiencing financial difficulties and struggling to pay of your debt, as well as afford your basic living expenses, your debt counsellor can help by negotiating with your CPs to have your monthly repayments reduced and the term of the loan extended.  This new restructured payment plan will then be made into a court order that will protect you from CPs taking legal action against you.

On the other hand, voluntary debt mediation does not involve the courts, so a court order cannot be obtained, which means you are not legally protected from your CPs taking legal action against you.

Secondly, debt mediation only addresses one credit agreement at a time, while debt management deals with your entire credit profile all at once.  In the case of debt management, you will end up with more cash in hand at the end of each month, so you can afford your monthly instalments, as well as cover your household expenses.

Naturally, personal circumstances will dictate which of our debt solutions is best for you, depending on your level of over-indebtedness and the seriousness of your adverse credit listings.

What is Debt Mediation?

What is Debt Mediation?

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At Reduce My Debts, we offer debt mediation as one of our workable, personalised debt solutions.  Your debt mediator will assist you with reaching a voluntary arrangement with your credit providers, with a view to reducing the amount that you have to pay them back, without having to go to court or take legal action – thereby saving you both money.

If you choose to enter into debt mediation, your debt mediator will:

  • Organise a sensible, inexpensive debt repayment plan and a reasonable, well-planned out monthly budget for you.
  • Prevent your assets from being repossessed.
  • Look into and rectify excessive, illegal emolument attachment orders.
  • Examine your accounts and pursue any suspected cases of reckless lending, extreme interest rates, fees and charges.

How will debt mediation benefit you?

  • Your monthly instalments will be reduced, so you have more cash in your pocket at the end of each month.
  • Your debt mediator will handle all communications with your credit provider, alleviating the pressure they would usually put on you, by calling you incessantly and demanding payment.
  • You will be protected from legal action being taken against you, provided that the credit provider is happy with the new arrangement and that you make the agreed upon instalments each month in a timely manner.
  • You are free to exit debt mediation at any time of your choosing, without having to go to court and arrange and order.
  • We will ensure that all the credit bureaus record the fact that you are having your debts restructured, so, if a credit provider or possible employer want to check your credit record, they will see that you are taking responsible steps towards settling your debts.
  • Once you have completed the debt mediation process, we will inform all of the credit bureaus that you are no longer in debt and they will remove all of the negative listings on your credit record/ provide you with a clearance certificate – so you are no longer blacklisted.

Your debt mediator will assist you with creating a sustainable, long-term budget so that you can maintain your financial health and remain debt free.


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How Debt Mediation Affects You

How Debt Mediation Affects You

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Debt mediation is a way of settling your debts by having your debt mediator negotiate an overall lower debt repayment with your credit providers for you. Your debt mediator will achieve this by settling your account with your credit providers for a percentage of your debts. Naturally, your credit score will be affected by debt mediation, but this will depend on the amount that you owe, what your credit providers do, how much credit you have and how long the process takes.

Debt mediation involves working together with your credit providers to arrange a new debt repayment plan that suits you both. The aim, of course, is to settle with your credit providers for a reduced amount that you both find reasonable. Credit providers might agree to a lowered payment because this will, at least, not leave them completely empty handed, whereas, if they went to court, there is a chance that they might walk away with less or nothing.

Debt mediation deals with only one credit provider at a time, so you will have to attend a number of negotiations in order to reach agreements with each of your many credit providers, which can be a very time consuming practice.

You and your credit provider will either agree upon an amount and you will pay them this or they might find your suggested amount unreasonable and decide to go ahead with court proceedings, which will be to your disadvantage as you will not be protected by the law, as you would have been under debt review.

Debt mediation will lower your credit score in the short-term.  Furthermore, if you stop paying the credit providers during this process, they will continue to report you to the credit bureaus. Also, your credit provider may add interest and late fees to the amount already owed, causing your total debt to go up.

Debt mediation is not the right choice for everyone and does present risks to the debtor, however, if you are able to reach an arrangement with your credit providers, it could turn out to be a very cost-effective option.  Your debt mediator at Reduce My Debts will advise you on the best debt solution for you and, if we feel mediation is too risky given your circumstances, we will provide you with other options that are more suited to your personal financial situation.


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When to use Debt Mediation

When to use Debt Mediation

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Debt mediation is suitable for you, if you would like to pay off your debts in a structured, efficient manner, but are not over-indebted or close to becoming over-indebted.

It involves agreeing to an informal arrangement with one of your credit providers at a time, with a debt mediator negotiating on your behalf to have your debts restructured.

You will still be able to take out credit, however, should your credit providers reject the new repayment arrangements you will not be protected from legal action being taken against you. This is why it is inadvisable to opt for debt mediation, if you are in a very dire financial situation.

However, if you have simply fallen behind on one or two payments, debt mediation may just be the best debt solution for you.

What makes debt mediation an attractive option?

  • It will prevent you from becoming blacklisted, if you have not already been blacklisted.
  • Arrangements will be negotiated with your credit provider to have your instalments reduced.
  • If you are not over-indebted, your debts will be restructured according to industry rules, without having to go into court.
  • We will help you to develop an affordable, realistic monthly budget so that you can settle your debts in the shortest amount of time possible.
  • Once you have reached the end of the agreed upon debt repayment term, you will be in full control of your finances.
  • We will negotiate with your credit providers for you, so you don’t have to deal with them.
  • We’ll attempt to have your monthly repayments reduced, provided your credit provider is in agreement.
  • We’ll try to save you money and up your disposable income where we can.

We will assist you with receiving a clearance certificate, once you have settled all your debts.


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