Plan well to destroy debt

Isaac Moledi

Isaac Moledi

Many people continue to swim in debt with the hope that they will win the lottery or inherit from a long lost uncle.

This is unlikely to happen. The truth about financial peace of mind is good habits and sound financial planning.

Ian Mcdonald, of MortgageSA Financial Planning, says people should not think that more money is the only way to financial peace of mind.

Mcdonald advises people to do the following to achieve fiscal serenity:

lPay off debts. Mcdonald says it is crucial to make a list of all your debts and then determine how much interest you are paying on each one. He says settle the debt with the highest interest first and draw up a budget every month.

"If you spend more than you earn you will never reduce your debt. Use any spare cash to pay off debts until they are gone."

He says once the debt is cleared, start a savings plan.

lMake tax work for you. Mcdonald says the taxman will pay you to save, especially if you save towards retirement. So make sure that you benefit from those tax deductions available for saving towards retirement purposes.

Everyone is entitled to this benefit. The levels depend on whether you belong to an employer-sponsored pension or provident fund or not.

Mcdonald says people must have a detailed financial needs analysis done by an accredited financial adviser. This will give a realistic perspective on whether you will meet your financial goals in the short or long term, and should you become a victim of unforeseen circumstances, you will know if your bank balance will handle it.

This should be a regular occurrence.

l Provide for your family. Prepare for dependents' financial stability through life cover.

Mcdonald says review the beneficiary clauses in your life cover during the needs analysis.

"Recent changes to Estate Duty and Capital Gains Tax mean you might require less cover."