Tight squeeze

[semisane1987]

Good evening I need financial advice three loans one for a car, clothing account and furniture account. I want to close the clothing and furniture account I need roughly R9000. 00 to close both. I have two saving policy one at Old Mutual ( I can't access the money until 2023) and other policy at Liberty Life it matured last year took the money, I'm now left with R10 000 still putting money it on that policy. I can take that money and settle my accounts then start from the beginning.

But I don't want to take money from that policy it's like my rainy saving account. I have other option I can go take soft loan on my provident fund and settle my account. The best thing the payment will be reasonable and I will never feel it as it will be coming directly from my payslip. But I know it's a bad idea to take other loan to repay other loan. But I really need to settle those accounts and focus on my car only.

I can pay them monthly definitely by December I will be done but December seems but far. What would be your advice be?.

 

[Hamster]

I reckon the only reason you're asking is because you know the answer, don't like it and want one of us to tell agree with you

 

[Thor]

What will prevent you to make debt for clothes and furniture again in the future?

 

[semisane1987]

I will never again clothing account maybe furniture account.

 

[Hamster]

I will never again clothing account maybe furniture account.

So don't take this the wrong way, but if you are "bad" at managing money (which a lot of people are) try and stay away from any type of credit as far as possible.

If you really want that new couch, rather save for six months and buy it later than buy it now and pay it off over 12 months for al.ost double the price.

Easier said than done, sure, especially when it comes to necessities. It should be the ideal goal though.

 

[Greg C]

Good evening I need financial advice three loans one for a car, clothing account and furniture account. I want to close the clothing and furniture account I need roughly R9000. 00 to close both. I have two saving policy one at Old Mutual ( I can't access the money until 2023) and other policy at Liberty Life it matured last year took the money, I'm now left with R10 000 still putting money it on that policy. I can take that money and settle my accounts then start from the beginning.

But I don't want to take money from that policy it's like my rainy saving account. I have other option I can go take soft loan on my provident fund and settle my account. The best thing the payment will be reasonable and I will never feel it as it will be coming directly from my payslip. But I know it's a bad idea to take other loan to repay other loan. But I really need to settle those accounts and focus on my car only.

I can pay them monthly definitely by December I will be done but December seems but far. What would be your advice be?.

THis predicament you are in - I need to highlight that most South africans go through this very idea through their head.

Essentially this is a numbers game and needs to be seen that way
Cost of interest/funding - Car (Basic rate of prime - I dont know your rate but lets go with assumptions)
Credit card - 18%
Retail account - 18%

You have a small policy account that may be aiming for CPI + 3 . Which puts your return at around 9 - 9.5%

Its a simple arithmatic. Your saving a month to settle your debt, outweighs the opportunity cost of leaving your funds in the policy.
You however will gain tremendously in the long run by settling these accounts NOW.

Remember though the term saving or investing is sacrificing the income for a long term view through surplus income. My point of bringing this up is you are managing to service your debt currently, when you settle it (my advice) do not go out and now spend the extra cash flow you have a month you would have used for the credit cards, but rather continue at the same spending levels you were before but put those same funds into the policy or another investment vehicle

There are some occasions where having gearing or leverage is good, but not for unsecured, high interest cost of debt for young individuals. The less cash flow you extend towards debt is that much further to cumulated interest and returns

 

[Greg C]

Your logic is 100% sound. But a rather wise professor once told me - Never be afraid of debt IF you can manage it. Use other peoples/institutions money to make your own.

A good yardstick. Attempt (difficult I know) to never extend beyond 33% (1 third) of your gross income in debt management - ie the payments should not exceed that of 1/3 of your cost to company. Its a conservative approach and one the banks - where I do credit analysis works aims it. If you are able to save and purchase the couch later great - but in a real world - are you going to continue to save, if the couch falls apart and you have nowhere to sit? Debt has a place. Just manage it

 

[Jehosefat]

A good yardstick. Attempt (difficult I know) to never extend beyond 33% (1 third) of your gross income in debt management - ie the payments should not exceed that of 1/3 of your cost to company. Its a conservative approach and one the banks - where I do credit analysis works aims it.

Not just the one bank. The NCA mandates that you cannot lend to someone if their total debt repayments would be more than 30% of their gross monthly income.

 

[Tman*]

Stop trying to "save" money, while you up to your neck in debt. Settle all debt, then save.

 

[skeptic_SA]

Whatever you do. Dont try load the couch into your car. It WILL burn the clutch.

 

[Radioboy]

Palony Salad.