How to avoid financial hangover every January

As the festive season has come and gone, a number of consumers are conducting a postmortem into whether they spent their funds wisely.

This bean-counting process could turn out to be humbling, especially for those who spent December being generous with their cash, as if they had forgotten that their free-handedness would come back to haunt them this month.

The sobering experience of running out of cash and being broke weeks before the January payday should be viewed as an opportunity for individuals to want to manage their finances better this year.

The festive season is a period where family members and friends, who hardly converge regularly throughout the year due to hectic schedules, come together to relax and have a good time.

Because of the amount of time spent at home, holiday destinations and drinking holes, December always sees spending skyrocket.

It is also a time when many income earners buy presents for family members.

The income earners also experience societal pressure as they are expected to fork out what could be termed as "Christmas tax" by buying goods for extended family and friends with limited financial means.

This is the reason why those with a predictable source of income should make saving for December their annual New Year's resolution and, eventually over the years, their financial management culture with an aim to make every January "broke-proof".

However, saving during the year comes with its own challenges because there are always primary and secondary interests that compete for your cash, like paying the excess following a car accident, a burst geyser and other unexpected expenses relating to home maintenance, for instance.

This is why forming part of a savings club, like a stokvel, in January could be one way of ensuring that you put away cash every month throughout the year and only access it in December.

The good thing about a stokvel is that it has rules that serve to inadvertently and indirectly apply some form of peer pressure on members who are unable to stump up their contributions when the going gets tough.

I've heard stories of how members had to borrow cash to avoid falling behind in their stokvel contributions.

We should also be wise during December and try our utmost not to spend money on non-essentials.

The chief executive of Cash Converters, Richard Mukheibir, quotes a recent festive season spending survey conducted by global accountancy firm Deloitte, which found that gifts represent only one-third of the average holiday spend.

"In fact, the bulk of spending over this period is related to sprucing up your wardrobe and your home, entertaining at home and socialising outside the home," he said.

"It is easy to underestimate how much these extras will add up to and play havoc with our New Year budgets."

We answer your questions

Question:

I'm struggling to cover all of my expenses, but I haven't defaulted on any of my accounts. My brother and I bought a property together (we have a joint bond) and he is now unemployed.

If I go under debt review, how will he be affected? Will it be harder for him to find employment, considering that employers usually do credit checks on prospective employees? - Anonymous

Answer:

Debt counsellor Michelle Barnardt replies: I recommend that you apply for debt review. Since you have a joint bond with your brother, the bond needs to be excluded from debt review. The National Credit Act does not prescribe that all credit agreements have to be re-arranged under a debt review order.

The implication of excluding a credit agreement from debt review is that you will have to pay the full instalment on that credit agreement - in this case the bond - while in debt review. Your relief lies in the reduction of instalments on debts in debt review.

Your debt review status will never affect your brother. Only when people are married in community of property will it affect another party, that being a spouse.

Question:

I applied for a business loan of R100000 from OCM Investment and it was approved. I was then asked to pay R1200, and then R5200 for the loan amount to be released.

Then I was told I needed to pay R7000 for the money to be released. Why am I being charged these fees? I found the loan provider on Gumtree.

The payments made to the loan provider have been made into an FNB account. - Anonymous

Answer:

Sowetan Money's Angelique Arde replies: Always make sure that you take credit from registered credit providers only.

To check whether a credit provider is registered, search the list of registrants on the National Credit Regulator's website www.ncr.org.za.

A legitimate lender would never insist on the debtor making advance payments before "releasing" funds.

Credit providers are also prohibited from charging more than certain regulated charges such as an initiation fee of R165 per credit agreement plus 10% of the amount in excess of R1000, but never more than R1050, in the case of an unsecured loan, and a maximum service fee of R60 a month.

While some well-known registered credit providers such as DirectAxis and RCS advertise on Gumtree, be very wary of those that you have not heard of before.

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