Advice on Savings & Debt

[Forza]

Hey Guys

I'm a recent graduate that recently moved from CPT to Pretoria for work reasons.

I'm thinking about getting a credit card and looking to buy my furniture on it such as fridge, bed, microwave, etc. Lets say the total im looking to purchase goods on it is 10k on 12month budget. What would my estimated monthly instalments be. I currently have a FNB gold cheque account and have no debt besides 1 clothing account.

Another question I'll be saving 3k p/month if not more. Looking to put a 2k in a fixed savings account and the 1k in a savings account which I'll have access to anytime. I'm thinking of saving the 1k at Capitec and 2k im not sure of yet or should I save the 3k in the Capitec savings account since the interest rate is pretty good.

Any advice would be appreciated guys.

 

[hellfire]

Hey Guys

I'm a recent graduate that recently moved from CPT to Pretoria for work reasons.

I'm thinking about getting a credit card and looking to buy my furniture on it such as fridge, bed, microwave, etc. Lets say the total im looking to purchase goods on it is 10k on 12month budget. What would my estimated monthly instalments be. I currently have a FNB gold cheque account and have no debt besides 1 clothing account.

Another question I'll be saving 3k p/month if not more. Looking to put a 2k in a fixed savings account and the 1k in a savings account which I'll have access to anytime. I'm thinking of saving the 1k at Capitec and 2k im not sure of yet or should I save the 3k in the Capitec savings account since the interest rate is pretty good.

Any advice would be appreciated guys.

Hi Charlie21.
Welcome to myBB.
I would suggest that you compare what you would pay in interest on the CC versus buying on credit from a store (Furniture City, House and Home, Lewis etc etc).
Often, furniture stores offer lower interest rates on their specials even if you're slightly higher risk and you may end up paying less over the long term.

If you did buy on your FNB gold card (I think it's 22% interest rate) over 12 months, your repayment would be around R940 per month (your total repayment would be R11,300 or so).

Now for your second question... rather pay the goods you want to buy off in 3 to 4 months with your savings and avoid paying 8 to 9 months of interest.
Then you can save thereafter.

Once you're saving, check the interest you get on a 32 day call account versus a longer term fixed deposit - it offers a little bit of flexibility for planned purchases/withdrawals.
You also get access fixed deposits whereby you get instant (penalty-free) access to a portion (usually 40%) of your deposit.
Bottom line is balance your savings between most flexibility and most interest earned.

Once you've got a bit more of a lump some, maybe consider FNB's MoneyMarket account - there's a minimum deposit (don't recall it offhand), but it's instant availability with a good interest rate.

 

[Forza]

Thx eehellfire

Yes i thought about that aswell. I'm just thinking having the CC will give me access to better deals by different stores which I could save on, whereas i have a house and home account I'll only be able to purchase there. Also il definately look to pay more than my monthly installment to finish it in a shorter period with my savings. By finishing my debt quicker would mean that I could save more then.

Plus I will be flying home to CPT often (lets say thrice a year) so I'm thinking a CC will come in handy in times of emergencies and good deals of flight tickets.

Thanks will def to more research recording the different interest rates and saving accounts because I'm currently thinking of a bit more short term until I'm nicely settled in then will look into long-term investments.

 

[GoB]

You don't need to buy on budget. You have 3k a month to buy with. Get a bed, fridge + microwave for 3k.

 

[Forza]

You don't need to buy on budget. You have 3k a month to buy with. Get a bed, fridge + microwave for 3k.

Well I would rather purchase "quality" items now than buy a small bed, fridge, microwave, tv etc for 3k then having to upgrade at a later stage.

 

[Sokum]

Use your cc and pay it off as quick as possible and look for specials on guzzle.co.za.
Phone FNB and ask them for the 9% intrest rate for 9 months on your CC Budget and pay it off in that time.

 

[themba990]

You don't need to buy on budget. You have 3k a month to buy with. Get a bed, fridge + microwave for 3k.

+1 bought my fridge for 1200 from the person who was vacating the flat i was about to rent... hasn't given me a problem

 

[^^vampire^^]

Let me help you there buddy:

1) Don't create debt, ever.
2) Buy couch and fridge cash during month 1
3) Sleep on couch for first month, put milk in fridge, learn to cook on stove.
4) Buy bed during month 2. Sleep in bed.
5) Buy microwave during month 3. Put popcorn in microwave. YUM!
6) Take savings from month 3 and put it with month 4's money and buy 42" TV.
7) YAY! 4 months, everything purchased, no debt. WOOHOO!

The problem is the instant gratification society we live in.

 

[hellfire]

Let me help you there buddy:

1) Don't create debt, ever.
2) Buy couch and fridge cash during month 1
3) Sleep on couch for first month, put milk in fridge, learn to cook on stove.
4) Buy bed during month 2. Sleep in bed.
5) Buy microwave during month 3. Put popcorn in microwave. YUM!
6) Take savings from month 3 and put it with month 4's money and buy 42" TV.
7) YAY! 4 months, everything purchased, no debt. WOOHOO!

The problem is the instant gratification society we live in.

I disagree with your point 1.
What about a house, or a car?
Or an emergency?
Debt is a useful tool - it must be used properly not avoided

 

[Ancalagon]

Here is the solution:

1. Get your credit card with a R10k limit.
2. Wait until payday, and then spend R10k. Immediately pay R3k into your credit card.
3. Remember that you do not get charged interest until 55 days have passed.
4. After 1 month, pay another R3k. You now have R4k outstanding.
5. After 2 months, pay another R3k. You have R1k outstanding, and will be charged interest for 5 days on the R4k you had outstanding.
6. Pay the final balance of R1k after the third month, and any outstanding interest, which won't be too much.

The thing is with credit cards is to use them carefully. Never get yourself into more debt than you can pay off. I use mine all the time, but I keep the balance low so as to avoid interest. I never pay any interest because of that, and earn huge rewards from it. Cases like this are good uses of a credit card, but remember to pay the balance off as quickly as possible to minimize the interest you pay.

 

[Beachless]

First off you should never use your credit card in the long term so try and avoid it. Obviously you don't have a choice right now so I would do it as follows.

Make sure you have a competitive CC interest rate(Virgin money has a good one without any card fees)
Remove the budget part of your CC and increase your limit.(This way you can pay it off sooner, not too much obviously as it is a risk but the aim is to get rid of the budget section)
Create a budget that you can easily pay off within 3 months and don't spend any more than that.
Make sure you pay it off within 3 months.
Set up a savings account for future purchases and only keep the CC for emergencies.

 

[SauRoNZA]

You aren't saving while you have credit.

So use the 2/3K that you want to "save" first and buy the stuff as the money is available to you.

Skip the credit card all together for as long as possible. As Beachless said a credit card is for cash-flow not for longterm purposes.


If you absolutely have to get it on credit the good old hire purchase option will probably cost you less in interest than the credit card, but I won't say that for certain.

 

[GoB]

What I didn't expect when I was making OCD purchases, was that you will always have the next item to buy... so if you buy a cheap microwave, the next items may be an oven / coffee machine / car / house / kids etc. It never ends. A microwave may only be next on your list in 15 years. By that time your world has changed.

Btw instead of buying a couch, you can use a single bed. Easiest way to get a chick in bed.

 

[Raphael123]

I disagree with your point 1.
What about a house, or a car?
Or an emergency?
Debt is a useful tool - it must be used properly not avoided

^^vampire^^ is correct you will one day regret that credit card.

For the house or car you want to create a good credit record so perhaps 1 item on higher purchase from a furniture store will help you. For an emergency get an overdraft but have it there just for an emergency. Debt is not a useful tool your credit worthiness as a good payer is. When you starting off you need to rough it out and with discipline and good planning you will eventually acquire all those items you need to buy quite easily.

As for the 3 or more trips to the mountain try to buy your airline tickets when Kulula & Mango run those specials, if you know the dates you are flying buy your tickets in advance. Another suggestion is to have an Edgars account which enables you to purchase tickets from Mango Airlines essentially on credit just as a backup or as you foresee an emergency.

For everything else there is no visa & mastercard. Cash is king!

If you must still have a credit card then Ancalagon's solution seems the way to go.

 

[hellfire]

^^vampire^^ is correct you will one day regret that credit card.

For the house or car you want to create a good credit record so perhaps 1 item on higher purchase from a furniture store will help you. For an emergency get an overdraft but have it there just for an emergency. Debt is not a useful tool your credit worthiness as a good payer is. When you starting off you need to rough it out and with discipline and good planning you will eventually acquire all those items you need to buy quite easily.

As for the 3 or more trips to the mountain try to buy your airline tickets when Kulula & Mango run those specials, if you know the dates you are flying buy your tickets in advance. Another suggestion is to have an Edgars account which enables you to purchase tickets from Mango Airlines essentially on credit just as a backup or as you foresee an emergency.

For everything else there is no visa & mastercard. Cash is king!

If you must still have a credit card then Ancalagon's solution seems the way to go.

One purchase will NOT help you. Banks check your bureau activity, and their scorecards can actually penalise you more heavily for having 'too little' credit activity than having slightly bad credit activity.
The reason for this is that they can price you accurately if they see you're a good or bad payer. If they don't know at all, you'll either get the worst possible price or be denied altogether

 

[PsyWulf]

Keep your credit card(s) active monthly,even if it's paid off in the same month. They are far more averse to granting credit to those afraid to use it

 

[Ancalagon]

^^vampire^^ is correct you will one day regret that credit card.

For the house or car you want to create a good credit record so perhaps 1 item on higher purchase from a furniture store will help you. For an emergency get an overdraft but have it there just for an emergency. Debt is not a useful tool your credit worthiness as a good payer is. When you starting off you need to rough it out and with discipline and good planning you will eventually acquire all those items you need to buy quite easily.

As for the 3 or more trips to the mountain try to buy your airline tickets when Kulula & Mango run those specials, if you know the dates you are flying buy your tickets in advance. Another suggestion is to have an Edgars account which enables you to purchase tickets from Mango Airlines essentially on credit just as a backup or as you foresee an emergency.

For everything else there is no visa & mastercard. Cash is king!

If you must still have a credit card then Ancalagon's solution seems the way to go.

I don't understand why people are scared of credit cards. I have had credit cards for 7 years now, and I've never got into trouble. In fact, I am pretty sure that my regular and consistent use of my credit card is the reason I was able to buy my house with a tiny deposit. Using your credit card regularly and keeping it paid off gets you a great credit score, which directly translates into savings on your vehicle and home loans.

It requires discipline though. If you see your credit card as a way to draw money out of your account, and not as a way to borrow money, then you won't have a problem. Only cases like the OP, where he needs to borrow money, are different. And that I would think of only as a temporary solution, and if you can borrow from family, that is better.

 

[herbertk]

+1 for not using credit card...

High interest rate and you pay just about no capital with the minimum payment, most stores and give you half the interest rate and after 12month its done no more debt...

I would also not save ANY money while I have debt, rather take the extra 3k and pay it into the account whatever it is, no sense in gettin 5% interest in what you save while paying 22% on what you lent....

 

[Forza]

Here is the solution:

1. Get your credit card with a R10k limit.
2. Wait until payday, and then spend R10k. Immediately pay R3k into your credit card.
3. Remember that you do not get charged interest until 55 days have passed.
4. After 1 month, pay another R3k. You now have R4k outstanding.
5. After 2 months, pay another R3k. You have R1k outstanding, and will be charged interest for 5 days on the R4k you had outstanding.
6. Pay the final balance of R1k after the third month, and any outstanding interest, which won't be too much.

The thing is with credit cards is to use them carefully. Never get yourself into more debt than you can pay off. I use mine all the time, but I keep the balance low so as to avoid interest. I never pay any interest because of that, and earn huge rewards from it. Cases like this are good uses of a credit card, but remember to pay the balance off as quickly as possible to minimize the interest you pay.

Thanks your suggestion seems pretty good. Im looking to pay it off as quick as possible and if that means paying 4k one month just to avoid the interest I'll do that. And yes its only for the 'big' items that I'm looking to use it on which i feel is a neccessity for now. All my other goods il purchase cash