Money Heroes
Money Heroes is an empowering 13-part series that will take you on a journey to applying the power of expert advice in achieving your unique financial goals.
From investments to tax, we've got you covered with empowering advice from industry leaders in South Africa that will accelerate your journey to success.
Hold on tight as we explore the rocky road that is debt and credit this week. How can you approach debt so you can remain firmly in the driver's seat of your finances?
We hear from our experts Faan van der Walt, CEO of We Buy Cars, and the van der Schyf brothers, who own Capital Craft restaurant and run a monthly music festival.
Debt and Credit
"Debt is the number one reason why most South Africans never get to their financial goals," says says deputy CEO of Momentum Metropolitan Jeanette Marais.
Avoiding debt is quite simple, says Marais. You receive a set salary on a monthly basis: Do you spend it to save, or do you spend it to pay off debt?
What makes debt difficult is paying off interest over time. It is like carrying water in a bucket that has a hole in it.
"You will never be able to fill up that bucket, and the water you lose is lost forever."
"If you understand interest, you will earn it on your investments. If you don't understand it, you will pay it on your debt."
Bad debt
The worst debt you can have is where you pay very high interest rates.
"That would be short-term debt like credit cards, or where you have a clothing account or furniture on credit. You pay very high interest rates on debt like that. In some cases, you probably end up paying double the value of that item just because of the interest."
Good debt
There are some forms of debt however that could be considered "good debt", such as a home or study loan.
"To buy property is definitely not bad debt. Firstly, you have an asset that backs that debt, and that asset will grow in value overtime," says Marais.
The last word:
It's always best to avoid high-interest debt. But if you have it, identify it and get rid of it as quickly as possible, and then make sure you don’t enter that situation again.
If you have spare income monthly, pick your long-term debt, like a home loan, and pay a little extra off every month.
Debt Tips
Theo Vorster, CEO of Galileo Capital, gives us his tips for this week's episode on debt and credit. Vorster says you cannot reach financial freedom with debt.
"You have to understand the implications of interest, specifically compound interest on your journey to financial freedom," says Vorster.
Here are four great tips he shares with us:
Success Stories: We Buy Cars
We Buys Cars CEO Faan van der Walt has some debt and credit tips to share. His success tips stem from his time in the used car and classifieds industry.
Start small - "If you've got your life savings in an account, or you've just retired and you want to start a business, don't bank the farm. Start small and take little steps. If the business grows, then you can scale and grow it."
Live within your means - "It's so interesting how people always say 'I can't get out with my salary'. Whether you're earning R10 000 or R40 000, it seems everyone struggles. So live within your means and learn to save."
Get savvy - "Most people don’t know financial terms. Get financially smart, watch episodes like this, get to know the industry and you’ll be better off."
Watch the video for two more valuable tips from Faan...
Success Stories: Capital Craft
Willie and Henk van der Schyf are co-founders of Pretoria restaurant, Capital Craft Beer Academy and monthly music festival, Park Acoustics.
They share some tips they’ve learnt about debt and credit in their careers.
Go into business with partners – "When you're a team, when you’re in trouble together, it helps motivating each other. It's a lot easier to owe money as a group than as an individual."
If you're in trouble, just pay something – "If you're in a situation where the vultures are circling, as long as your creditors see that you're making an effort and you're paying something - R1 000 or R5 000 - that will usually give you some breathing space."
Watch the video for more tips from Henk and Willie...
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