Debt
Money Heroes - Episode 3
Money Heroes
Money Heroes is a 13-part series that explores various topics that influence our short- and long-term financial decisions. From credit and retirement to investments and holidays, we've got you covered with sound advice from industry leaders in South Africa that will accelerate your journey to success.
In the third episode of this series, experts and real people share their experiences with debt. What is the difference between good and bad debt and is it even possible to live debt-free?
Find out below.
The good, the bad and the ugly
Whether it's for a new home or to further your studies, debt is inevitable for many South Africans. Jeanette Marais, deputy CEO of Momentum Metropolitan, says that it’s very important to determine your relationship with debt early on in life because debt can either be productive or very destructive.
Good debt
Good debt is debt that allows you to invest in your future. Jeanette says something like a student loan can be considered good debt because it sets you up for the rest of your life and will eventually make a difference to your earning potential.
Bad debt
Most short-term debt is really bad because it's where you'll pay the highest interest. For this reason, Jeanette warns against opening clothing accounts and buying furniture or appliances on debt.
Ugly debt
Any debt that you cannot really afford should be a red flag. Home loans or vehicle financing can be good debt but it's really important that you stay diligent with your re-payments. Any debt with high interest is crippling and should be managed or paid off as soon as possible.
Lastly, Jeanette says that the most important thing to remember about debt is that you can always pay it off sooner.
Tips from Theo Vorster
"From far, debt and cash may look the same but there's a massive difference," says Theo Vorster, CEO of Galileo Capital Holdings.
Here are Theo's three principles on debt.
How Kristia van Heerden turned her bad debt around
Financial journalist Kristia van Heerden shares how she got into bad debt through a series of bad decisions. From buying clothes to funding nights out with friends, Van Heerden just found herself in a downward spiral that soon amounted to over R100 000.
Van Heerden, who now hosts the podcast series The Fat Wallet Show, says a lot of those choices just sprung from not knowing about basic financial concepts like interest. Once she understood that you have to pay back way more than what you borrowed, she set herself up to get out of debt.
"People don't realise that they trap themselves when they take on certain kinds of debt."
However, once bitten twice shy isn't always the case when it comes to the temptations of debt. “Financial health is like physical health,” Van Heerden says. “It’s about making a good choice more often than a bad one." Similarly to a a healthy lifestyle, a healthy financial lifestyle means you have to say no to some things that look good. It might also mean that you will lapse every now and again and give in to temptation.
The key is to realise when you are diverting from your healthy habits and to then get back on track - allowing yourself a little bit of space and grace to do so.
Debt rescue with Neil Roets
For some, the light at the end of their debt tunnel is just too far. If you find yourself in that dire strait, not all hope is lost. Companies like Debt Rescue provides debt counseling services to members of the South African public.
"Almost half of all credit active consumers are over indebted," says Neil Roets, CEO of Debt Rescue. Unfortunately this stems from the fact that many of us aren't financially literate and little emphasis is placed on gearing South Africans on money matters from a young age. This means that many of us have to learn the hard way.
A lot of people think that if a big company offers you credit facilities, you can afford it by default. But that's not always the case and you have to do your homework yourself. Roets' advice is firstly to decide whether or not you really need to take out a loan for something because to going into debt for luxury items is really not worth while. Secondly, you need to set up a budget to see if you can afford to service your debt monthly.
Back to homepage.
Building wealth is a journey
Who doesn’t want financial success? It’s something we all dream about, but getting there can be tough, especially if we’ve made poor financial decisions. It all starts by setting financial goals, but it can be hard to know where to begin. Having the right financial adviser can make all the difference and accelerate you towards success. Our advisers will get to know you – what do you value? What are your goals? This deep discovery sets the foundation for the relationship that is built on trust and a partnership with you.
Find a financial adviser
Speak to a financial adviser
Built with Shorthand