Monday 17 May 2021
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Live a debt-free life

Close up of female accountant or banker making calculations. Savings, finances and economy concept

Frugal living does not have to be a life devoid of fun. In fact, you might be surprised how easy it is to trim your expenses with a little patience and planning- an exercise many have failed to master.  The more you can get out of every dollar you spend, the more money you will have to save for potential emergencies or life assets deemed as a must-have. Young people live in a world defined by the numbers they earn every month. As such, entering their working class straight after university comes with an activation mode of catching their dreams. They now can afford that BMW, the flat screen TV, the latest phone with a note pad and fill the tables in Eveline Street with everything the breweries has stocked.  They tie their bank particulars to long-term payments such as the bed they sleep on, the plasma TV they boast about and sometimes the clothes they wear. A month skipped without fulfilling the payment deal and you will see the owners of the assets repossess their goods.  Before the dawn of the following day, the young professional heads to the nearest cash loan to hold on to his goods because his friends cannot afford to see the once- upon-a-time beautiful house look undressed. The above is a cycle of many young professionals who swim in the pool of the never ending cycle. And as a result they never quite achieve financial freedom.

Avoid borrowing to pay for the borrowed
Cash loans have over the years contributed to young professionals bad credit. With interest rates as high as 30%, repayment schedules are tough to meet. In as much as they come to relief one’s financial burden life, the consequences are never in favour of growth. Thus, young professionals are advised to keep away from the temptations.  “One should avoid borrowing money from cash loans. The interest rate charged is crippling and you will find yourself in a vicious cycle of borrowing money to pay for borrowed money. If the entity offers debt consolidation and debt counselling, then one may wish to go the cash loan route, however it is vital that you as the individual must be clear on why you borrow this money,” advised Old Mutual’s Quinten Potgieter.  The habit of running to cash loans has deprived many the opportunities to move forward and is therefore discouraged. Quinten also adds that for other purchases like furniture, it is best to commit to saving a certain amount of money per month, i.e. in a unit trust, and once the young person has saved up enough to make the purchase then when one is able to pay cash and negotiate cash discounts. By going this route, there is no long term paying.

Think before you buy
It is every young person’s dream to purchase the vehicle of their dreams now that they have started earning a monthly salary. This is especially so living in a country where salaries are out of reach to purchasing a house. As such, the status of owning a car is a pulling magnet to society expectations. The flip side of this premature investment is that even those with meagre salaries still follow the footprint to the nearest dealership to sign the monthly deduction that would see them being the next cool guy in the street with a new Golf.  What happens in the long run is that after the car deductions have taken their share of the salary, little is left for fuel and to fill the fridge. Quinten lectures that larger purchases such as a car and house need to be considered carefully and evaluated in accordance to affordability.  He adds, “It is also important to acknowledge that a car is not an asset, but a liability. In a consumer driven industry many people fall in the trap of indebting themselves to keep up with the life of those wealthier than they are.”

Save and spend wisely
While the pendulum swinging to saving many still fail to comprehend. The concept of saving is foreign to many with a line of excuses as to why it is not done. Quinten puts it that while saving is important, a component that will inspire many to save is when one identifies why they are saving in the first place. In addition, the commitment is very key.  “The question you need to ask is what am I saving for? This will help you determine the timeframe that you need to link to reaching the required savings goal. It is vital to commit to a monthly savings plan. In today’s day and age, we want quick fixes. This is however not how the world of creating your own wealth works. It is with diligent budgeting and saving, even smaller amounts per month ultimately grow.” Parallel to saving is the aspect of spending that has led many to depleted accounts. The habitual haphazard spending tendency can cripple one’s saving ambitions as there is almost never anything to save. As such, the formula to spending is explained by Quinten.

“Always ask yourself; do I need this? Can I go without it? Can I afford it? Budgeting is vital thus you need to be clear how much do you need for rent, car payments, fuel, public transport, food, airtime or contract payment and toiletries. One may laugh, but if you are not 100% clear what you need per month to sustain your lifestyle you will never truly get a grip on your expenses and neither will you be able to identify pockets of expenses that could be reduced.” Being in control of your finances is said to be a great stress reliever. As such the art is not in making money, but in keeping it and spending it in a wise manner. Take charge of your finance and allow it to work for you.

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