Q: I can’t seem to get on top of my credit cards and overdraft. Help!
Johan Maree, CEO of FNB’s Credit Card division, says:
A: Your first step should be to chat to your bank. They’ll have a number of debt-relief solutions for you, and debt consolidation is one. It lets you combine all your debt, from retail-store debt, loans and other credit card debts, all into one account, making the admin much easier.
Some options, like the FNB Credit Card Balance Transfer, are similar but allow you to keep spending on what you need, while paying off your debt over a longer time. These aren’t ‘get out of jail free’ cards, they simply make the management of debt easier by lowering your monthly payments. To make a better change, pay off your debt and form healthier spending habits.
Financing home improvements
Q: I’m redoing my kitchen and fixing up the house. What’s the best way to pay for it? Should I get a personal loan?
Monde Motha, channel manager at First National Bank Home Loans, says:
A: As a homeowner, registering a further loan on your existing bond will be the most cost effective way of raising funds for your planned home improvements. You won’t need another loan, because the repayment on your bond will adjust accordingly, and your interest rate will be renegotiated. But bear in mind that your property will need to have enough value to allow for the increase in your bond.
Doing it for the kids
Q: My eldest is just about to start high school and I’m terrified of what comes next. How will I ever afford to send my kids to university?
Lloyd Buthelezi, general manager of Nedbank Financial Planning, says:
A: It’s always a good idea to plan ahead for future expenses as it will give you the financial freedom and ability to provide for opportunities, such as a good education for your children. The best way to save for education is through unit trusts or education policies.
With an education policy, there’s a more structured savings plan, which means you won’t have easy access to your savings. But it has its advantages, such as access to asset managers, and the ability to guarantee your children’s education if something were to happen to you, and you were no longer able to provide for them. Unit trusts are another great option, especially if you need flexibility and earlier access to your money.
Where to save
Q: I want to invest money but don’t know how – can you help?
Michelle Human, senior legal adviser at Liberty Retail SA, says:
A: Investing is a scary prospect but, with a bit of understanding, you’ll be able to make educated decisions. Do your research and invest with an investment house that offers good returns. Here are a couple of ways to invest:
- Unit trusts are great if you’ve paid off all your debt and have a bit of spare cash. They’re low risk, professionally managed and work for short- and long-term savings. Equity unit trusts are risky, but can produce high returns.
- Endowments only mature after five years. They’ll work for you if you’re not a very disciplined investor.
- Retirement annuities are a tax-efficient way to save for retirement and protect your savings until you retire. It’s always best to speak to an advisor before making a big investment decision.
Insider bond tips
Q: I’m finally ready to buy a house. Where do I start, and what must I keep in mind when applying for a loan?
Steven Barker, head of Home Loans at Standard Bank, says:
A: Home prices have been stable for some time now, so getting your own home may be a real option. Before you do, make an appointment with the bank to look into your financial ‘fitness’, the costs involved and details about the property. Keep in mind your credit history, outstanding debts, and accounts that might be in arrears.
Remember there are legal and transfer costs involved in buying a house, and other sneaky surprises such as a deposit on the house, and the rates and taxes to be paid. Also factor the cost of electricity deposits, security and insurance into your budget and remember, if the interest rates go up, so do your monthly payments. Bearing all of that in mind, the effort is usually worth it. Property values generally increase over the years, so taking the first step to home ownership is a step towards building your own wealth.
Q: I have a pension plan at work, but I’d like to put a little more aside. Should I invest in the same plan, or find a better one somewhere else?
Sinenhlanhla Nzama, marketing actuary at Old Mutual, says:
A: Ask your employer what the maximum is you can contribute to your plan and whether you’re allowed to make a once-off payment into that plan. If you’re already contributing the maximum, consider a retirement annuity, which you can buy yourself – and it has tax advantages. If you’re looking for flexibility, consider a unit trust-linked retirement annuity. If you want access to your savings before you are 55, then look into savings options such as unit trusts or investment policies, too.