The Real Money Jackpot
You don’t always need more cash to achieve financial stability. Two business advisers reveal the strategies that can bring freedom and triumph. By Julia Landau
Phindile Maitse, an organisational design consultant for national development at a large financial service provider, worked at a commercial institution but didn’t have a handle on her own budget. “I was a credit card addict,” she recalls. “I’d wait until the balance was at zero and then go on a shopping spree. I preferred to use money I didn’t actually have.” As her credit rating was good, banks kept increasing Phindile’s allowance without bothering to check if her salary was commensurate with her spending. She was sinking into a quicksand of debits and payments. “Every month’s end was a nightmare. I couldn’t sleep at night. I was so worried about the money I owed, yet still unable to resist buying new clothes.” Phindile was finally forced to sell her house, as she couldn’t afford the monthly payments.
The Intervention: Phindile was so deeply in debt that without it she could have bought a car and paid for the insurance. Eventually, a friend convinced her to buy Phumelele Ndumo’s books, From Debt to Riches and 7 Secrets Why the Rich Own Their Homes, as a means of assessing her financial situation. So she made a spreadsheet, determined the cost she could cut back on, such as excess spending on unnecessary items, and the essential ones, like health insurance, which she had to maintain. Over two years, beginning with the card with the highest interest rate, she worked her way towards becoming debt-free. She decided to meet with Phumelele face-to-face so she could learn more. On Phumelele’s advice, she took a further bond out on her house, and bought her daughter a flat, in cash. Her daughter paid rent to her mom so that she, in turn, could repay the bond loan.
The Big Idea: While caution should be exercised around debt, Phumelele says you can use available loans, such as an access bond on your home loan. “The generally low interest rates on home loans mark them as positive investments.”
What should you look for to ensure that your savings make you richer, not poorer? Phumelele Ndumo explains.
1.It’s very important when you save money to know what the rate of inflation is and to ensure that your money grows at a rate that is at least equal to that rate. Currently, the official rate of inflation is 5,7 percent, so shop around for a bank that will give you an interest rate on your savings that is higher or at least equal to that.
2. Make sure you don’t pay too much in fees when you make deposits. Depositing cash over the counter is expensive. Putting a stop order or a debit order against your main account to transfer money into your savings is a better way to not only save on bank fees, but also to ensure that you put money away monthly.
3. One of the best ways to save money is to buy government retail bonds. You won’t pay fees, and the rate of return is currently at 7,25 percent on a two-year bond, 7,50 percent on a three-year bond and 8 percent on a five-year bond.
Do you think a book can make a positive change in your life or the life of your dear ones? It was a pleasant surprise to read that Phindi, as a result of reading my books, was able to resist bad debt, get out of credit card debt and even buy a flat for her daughter CASH. If you haven’t got yourself a copy of O magazine yet, you can read the attached article. The book, From Debt to Riches by Phumelele Ndumo is available at Exclusives, CNA and Adams bookshops for only R134. I look forward to receiving your testimonies too.