Sticking to a budget will prevent destructive debt

The temptation to fall into debt is everywhere you look: fancy cars, furniture, bigger TVs and extravagant holidays. And all the financial institutions are looking for a piece of the action.

The temptation to fall into debt is everywhere you look: fancy cars, furniture, bigger TVs and extravagant holidays. And all the financial institutions are looking for a piece of the action.

Some big clothing companies are now offering home loans at competitive rates. Major vehicle finance houses are offering clients huge loans, completely separate from their cars. And many people are driving cars they cannot afford and that they know will be repossessed.

The credit train is gaining momentum.

The rewards are plentiful. Depending on where you spend your money or what institution offers you credit, you can earn points, holidays, and the latest inducement - experiences. Imagine earning an experience?

I receive at least three offers a week for new credit cards from institutions - and not all of them are banks.

There are consequences to our spending, especially on credit, which almost everyone must have felt with the 5percent rate increases over the past year. It starts off small and collects momentum until you need credit to pay off other credit and the downward spiral continues.

Because of the new National Credit Act, many advertisers are now stating the full price you pay for an item you buy on credit. Looking through the weekend papers, a television set advertised for R9000 that can be bought on terms or credit now has another block in the advertisement. It shows that you will end up paying R12000 for it.

Do we give enough consideration to the consequences of our spending?

We need to plan our finances carefully and to ensure that we are living within our means to avoid getting caught in the credit trap.

Do this through careful examination of your monthly expenses by drawing up a budget - and sticking to it.

To prepare your budget, deduct from your income the main expenses, such as the mortgage, car repayments, regular household expenses and education costs. Then determine how much is left. From this figure, allocate yourself a set amount each month for all other luxury spending.

Most importantly, set aside a certain amount for savings, and never allow your expenses to eat into this.

Make every effort to stick to your budget because each time you exceed it, even by a little, you jeopardise your future. A budget is only a useful tool if you stick to it.

Financial stress is often one of the biggest causes of depression.

Knowing your finances are under control and you are living within your means is far preferable to the thrill of frivolous spending.

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