South Africans are stretching their income to keep up with food and fuel price hikes and the impact of rising interest rates on monthly debt payments.
Ayanda Ndimande, Head of Sanlam Business Development for Retail Credit, says there is a growing reliance on credit to compensate for the soaring cost of living.
“People in this position need to create a plan to help them manage their finances and avoid drowning in debt. Credit can provide a quick fix, but insufficient planning and credit management can lead to a viscious cycle of debt that's difficult to escape."
These financial habits can help you smash your financial goals:
1. Create a roadmap to your goals
Nicolette Mashile (a.k.a. Financial Bunny) says that without the correct systems, you’re unlikely to achieve your goals. “I had a goal to own 10 properties by 30, but it ended up just being a dream because I did not have the right systems in place to make it happen.”
Financial planning involves creating a roadmap to achieve your goals so that you can live a life of confidence.
2. Know your credit score
At some point in your life, credit may be necessary. “Credit is valuable when used correctly, but it can lead to financial ruin if not managed carefully. This starts with understanding your credit score. Your score represents your creditworthiness, telling prospective lenders how much of a ‘risk’ you are based on past debt repayment behaviour,” explains Ndimande.
The Sanlam Credit Dashboard allows you to do a free credit score check to help you understand and manage your credit score.
You can use the dashboard to:
- See how much you are paying on accounts.
- Check if you can consolidate your credit and free up cash flow.
- Pick up suspicious activity.
- Speak to a financial coach – for free.
- Explore a range of suitable financial and credit products.
3. Improve your credit score
Now that you know your score, get closer to smashing your goals by changing your habits. Identify financial habits that do not serve your goals and instil healthy habits instead:
- Pay debts on time.
- Maintain a healthy credit utilisation ratio of 30% or less: This is the amount of revolving credit you use divided by the total amount you have available. Still confused? Speak to a Sanlam credit coach.
- Determine your affordability: Don't open or apply for new accounts unless you really need them, and make sure you can afford the repayments.
- Pay off your debt ASAP: Prioritise high-interest debt like credit cards and store accounts.
“Credit forms part of your financial power. A good credit record increases your chances of qualifying for loans at preferential interest rates, significantly impacting your total repayments," adds Ndimande.
Financial planning and credit management take time and practice to master. That's why Sanlam strives to empower people to manage their credit effectively and achieve their goals to create a solid foundation for their financial future.
In partnership with Sanlam.