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Don’t let your financial guard down now
Whilst it’s good news that household debt levels continue to fall, consumers can’t afford to be complacent.
That’s the advice of Berry Everitt, MD of the Chas Everitt International property group, who says: “SA consumers and particularly homeowners have clearly done a lot over the past three years to cut their spending and pay off debts, but recent events in Europe reveal that we all need to stay prepared for further financial turmoil in the world.
“Consequently, households in SA should keep looking for more ways to save and do better financially, so that they can build up a cushion against the type of financial shocks that have proved so devastating for many people over the past few years - like sudden huge increases in the costs of transport, food, water and electricity - and against future interest rate increases.”
In addition, he says, many people have borrowed against the equity in their homes and depleted their retirement savings in order to stay afloat in recent years, and they should be looking to rebuild those resources as fast as possible.
“What is more, this is not the time to buy a new car or go travelling if your home – which is most people’s biggest asset – is in need of repairs or renovations that have been neglected while you struggled to keep your finances on an even keel. Similarly, you should not be tempted to go on a spending spree this festive season just because you’ve paid off a big chunk of your credit card debt and are feeling unusually prosperous.”
Everitt says that what consumers should be doing is using any “breathing space” that they have now to create a longer-term financial strategy, drawing on the hard lessons learnt over the past few years. “For example, if you’ve been successful in paying off debts by strictly restructuring your household budget and being very disciplined about your spending, don’t waste all that effort.
“Take the cash that is ‘free’ now that your debts have been repaid and do something really constructive with it. If you are renting, start saving for a deposit on a home of your own so that you can get the long-term benefits of the current low prices and low interest rates. If you already own a home, use the extra cash to reduce the capital amount of your home loan, cut the repayment term and generate huge savings in interest.
He says families should also use the opportunity to make contingency plans now “so that they won’t be thrown into a panic and will already know what their financial situation is and what they need to do if, for example, one spouse gets retrenched or the family faces a medical emergency. Knowledge, as they say, is power.
“And in line with that, they should continue to seek ways to cut costs, barter goods and services and earn additional income in a very determined effort to further improve their financial position in the coming year. We don’t believe anyone can afford to be complacent about this or return to the carefree spending habits of the past decade.”
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A leading real estate group in South Africa, with a committed international focus, the Chas Everitt International team delivers an outstanding property service to the international real estate investor and South African property buyers and sellers.