Saving needs to start with paying off debt

By Staff Writer

July may have been National Savings Month, but with the consumer debt at its current levels of nearly 80% of disposable income, consumers need to pay off their expensive debt before they start saving.

Luke Hirst, MD of debt experts DebtBusters says "It is never too late to start saving. Paying off your bond quicker is in itself a great way of saving. Adopting a budget and saving discipline each month will help you manage your money more effectively and consumers will soon see the savings.'

Hirst goes on to say that "whilst there are tax incentives for savings vehicles, such as retail bonds and retirement annuities, their returns are often small in comparison to paying off unsecured debt like credit cards and store cards, which attract interest and charges of over 25%."

There are signs that consumers worldwide are changing their habits, and paying off debt and saving more. This is accentuated in countries like the UK where interest rates have been drastically lowered to 0.5%. In the UK, over 100 million rands of consumer capital mortgage debt was paid off in 2009, whereas in South Africa it was a negligible amount. Hirst says "interest rates need to be reduced by another 2% to enable consumers to start seriously reducing their debt levels."

MasterCard recently performed a survey that showed that 45% of consumers plan to decrease their discretionary spending over the next six months, while 65% of consumer expect to save either more or as much as they had in the previous six months. In order to have a financially stable retirement SA consumers need to start putting this into action now.

Recent Articles

Featured Which one should you get first: life cover or a retirement annuity?

Financial planning can be a brain-racking process because it means making difficult decisions such as choosing the most suitable products for you. The one challenge faced by those who are financially constrained is which product to choose: life cover or a retirement annuity (RA).

Read more

Should you save or invest your money?

While saving means putting away cash for future use, investment involves purchasing assets which will yield good returns in the future.

Read more

Retirement annuities compared – pick the one for you

When selecting an RA you must know the type of annuity you are investing in. Retirement annuities are divided into two categories: traditional and new generation annuities.

Read more

Recent tax changes – how do they affect you?

In January this year, various amendments to the Taxation Laws Amendment Bill and the Tax Administration Act were announced. While some changes will benefit you, others could be to your disadvantage. Justmoney looks at how some of the recent changes will impact you.

Read more

Sign Up

To our weekly newsletter for advice you can bank on

Deals

Save R100 when you buy a tracker at Takealot

Price: R289
When: Daily
Where: Online

Pamper yourself and partner for less at Bakwena Day Spa

Price: From R999
When: Until 31 July
Where: Hartbeespoort

Pay only R35 for the new Nandos Boujee Bowl

Price: R35
When: Daily
Where: Nationwide