Sonny [not his real name] is another young black professional who has spent the better part of his adult life struggling with debt, despite his Masters in IT qualification. He is married with 3 kids and earns just over R100 000. This is proof that debt does not care about your qualifications or your income. This is why it is important to pay close attention to your budget, especially before you make any big financial decisions that are going to affect your budget e.g. buying a car, buying a home, deciding on the school your kid/s should attend, going on an expensive holiday, etc…
Sonny is finally out of debt review & we are busy helping him to buy a family car and we will be helping him with a home loan in a few months. Not having a home for his family is one thing that caused him to sacrifice and to be able to get out of debt review in 2 years. I hope that by sharing his story, other young people will learn from his mistakes and not put themselves under the same stress
1.How many debts did you have?
I had 16 debts under debt review. Total owing for all debts was almost R250,000. I was paying R8000 monthly for actual debts. Along the way, I still got into more debt which was school fees for my 3 kids, accounts ended up getting handed over to lawyers, so I had to make arrangements to pay for some of these separately. These alone were just under R30,000.
2. How come you weren’t able to manage your budget when you have a Masters degree in IT?
We were never taught about money/finances growing up at home, not in school nor Varsity. I had to learn as I go, with all the pressures of black tax, having to take care of home first and building a big house at home on credit, while also taking care of your immediate family, and all the egos/pressures of wanting to have it all now, and underestimating the cost of debt, and the possibility of being overpowered by debt.
3. What caused you to go under debt review?
I just couldn’t keep up anymore, I couldn’t manage to pay all debts monthly, and still not able to have monthly necessities met throughout the month, so we had to borrow money monthly just to survive the rest of the month and this was a monthly thing. Also, I was getting extremely harassed by creditors which gave me no peace, and also I was afraid of the possibility of repossessions and/or legal/court judgements
4. How long were you under debt review for?
Just under 2 years
5. Many people spend a lot of time under debt review, how come you were there for 2 years only?
We couldn’t take it anymore. While on debt review we couldn’t buy anything on credit, nor do anything that required a clean credit record. I couldn’t get jobs in any financial institution. I remember I had an interview with one of the big banks at some point and they loved me from the first interview, but I decided to disclose that I was under debt review asap, and it was an immediate deal breaker, not only with them but I cannot mention the number of career opportunities I lost as a result, being called by recruitment agencies and going into interviews but not being able to go through just because of being under debt review. Also, we couldn’t buy a house, and worse, we couldn’t even change our current rental property cause all rental agents also did credit checks and wanted a clean credit record. We didn’t want to buy anything on credit, only a house, or atleast be able to change rental, and also be able to apply for any job without being limited by debt review. As a result of this, when I eventually got another job, we decided to sacrifice my pension fundto pay off all debts and short-cut the whole debt review process.
6. How do you feel about having sacrificed your pension to get out of debt?
As much as we know the risk of reduced pension when retirement comes, we were happy to take the risk considering all the benefits. We’re very happy with our decision, especially since I’m still young and will still be working for the next 30 years, and I’ve received quite higher positions/salaries, so chances of covering up are high. Now we’re in the process of looking for a home we can buy, and also investments.
7. What lessons have you learnt?
Never underestimate debt, individually they might seem small debts, R1000 here, R500 there, etc, and overtime these accumulate and by the time you realize, you can’t keep up. Also, learn about finances and avoid debt at all costs, use cash as far as possible, if you can’t afford it then save up for a while, you don’t have to have everything at once, things can wait, and teach your kids and those around you. Only keep 1 or 2 affordable and necessary debts (e.g. a house or affordable car credit or affordable phone contract) for credit record cause should you want anything necessary on credit, creditors want to check something active you’re paying for and are up to date with a good historical record. Be intentional about all these things and be disciplined, and decide to check on each other with your partner and your financial advisor to ensure you keep each other on the right track.
8. Do you have any regrets about going under debt review?
It helped relieve us from creditor harassment and the possibility of repossessions and legal issues, and also it helped to reduce monthly repayment to something more affordable. The harassment wasn’t only on me but my wife as well as we’re married in community of property, and she also couldn’t do anything on credit by the way. Reducing debt monthly payment also increases the payment term and also increases interests, so you end up paying more, and you also can’t buy anything on credit, can’t get a new rental house, can’t get any job in the financial industry, so because of these I do regret going under debt review.
9. What advice would you give someone who is thinking of going under debt review?
First consult a financial advisor and ensure you’ve considered all other possible avenues. Let debt review be the absolute last resort, and be prepared not to change your house or buy anything on credit, and not change your job, for about 5-6 years. For those not yet in this situation, oh it can happen to anyone. Avoid it at all cost. Prevention is better than cure.
10. Share anything else that you think would help all of us
Let’s do everything we can to teach ourselves and our loved ones about finances and debts (especially bad debt) so we don’t all get into the same trap. Let’s start the habit of investing and saving money, and no money is too little to save. I’ve been under such hectic financial situations such that I now appreciate each and every R100 that I can put away into some form of savings. Let’s start spending more of our money into things such as investments and life covers. Right now, I’m in the process of having the same amount I paid into debt review monthly, R8000, to go towards our family life covers, an emergency fund and long-term investment funds. Lastly, let’s do everything we can to avoid debt, if having a house, pay it off asap (but don’t close the bond account as you can have access into those funds in case of emergency), buy cars cash if you can, or affordable instalment, and just buy everything in cash, leaving only one or two necessary but affordable debts for good record. Let’s avoid the system of debt as it’s not Godly, it’s just a system of slavery. Blessings
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