With Black Friday and the festive season coming, you need to take extra care of your finances, especially credit.
South Africans are feeling the strain financially as a result of high inflation, interest rate rises, and rising food prices.
Many people are forced to use credit to get through difficult times due to financial constraints.
This is according to the 2022 Q3 Eighty20/XDS Credit Stress Report, which was issued in December of last year.
The report showed that 60% of middle-income individuals’ salaries go towards servicing credit accounts.
The most well-known guideline in personal finance is to live within your means, according to Wonga.
Wonga’s head of marketing, James Williams, said that individuals must handle their credit wisely since it affects their long-term financial prospects.
“Taking the necessary steps to meet your credit obligations can ultimately pave the way towards successfully meeting your financial goals.
“Having access to credit requires the responsibility of being financially literate in order to be in control of your money. Before entering into a credit arrangement, one also has to be honest with themselves and realistic about what they can afford,” he said.
Williams gave five tips for more responsible debt management:
Create and stick to a budget
A realistic budget will show you exactly what your spending and income are. Make it a habit to go over your bank statement and underline the needless products you spend money on. This will raise your awareness of your spending habits and affordability.
Pay all of your expenses on time
This will keep you from having a low credit rating and the worry of incurring additional charges as a result of missing payments.
Maintaining a solid credit rating allows you to borrow money when you need it most, as well as access reduced interest rates when purchasing high-value products like your dream home or automobile.
Understand how much you owe as well as who you owe it to
Determine how much debt you have and to whom you owe it. Maintain an up-to-date record of all your debts, including creditors, total amounts owed, monthly payments, and due dates. Some debts are more expensive than others; therefore, prioritise the bills with the highest interest rate.
Reduce impulsive spending
Understand your impulsive spending triggers and build a strategy to avoid them.
Set up a shopping budget with a precise list, for example, to prevent you from spending on items you did not budget for. You may also set aside money to treat yourself to the pleasures you appreciate as a reward for sticking to and accomplishing your financial objectives.
Avoid excessive debt
Make sure that you only borrow what you truly need while using any type of credit.
Spend your credit card money on items that will benefit you in the long run, such as remodelling your home or increasing your education.
It is the kind of debt that creates money, leaving you better off than you were before.
IOL