Spring clean your bank account and budget
Spring isn’t just a great time to clean out your home and wardrobe. It’s also the perfect opportunity to clean out the cobwebs on your bank account and revisit all your loans, contracts and spending habits to make sure these are in top shape. Make sure that you’re not losing money on unnecessary debit orders, long forgotten contracts and ageing debts that don’t seem to be going anywhere.
Tlalane Ntuli, co-founder and Chief Operating Officer of Yalu, a digital insurer that offers credit life insurance, says the best way to take control of your finances is to have a clear plan of what your financial commitments are, how much you pay and for what benefit, and to acid test those arrangements every year as to whether these are still fit for purpose and priced correctly for your needs.
“It’s human nature to sign off on things and then forget about them – contracts and agreements are often entered into and then never given any consideration again. It’s important to go back and revisit these as part of an annual financial spring clean, ensuring that these agreements are still the best solution for you, and whether there may be better options and pricing available to you.”
Here are Yalu’s top tips for cleaning up your finances this spring:
Thoroughly check your bank statements and all debit orders
Fraudulent debit orders are a big problem. In fact, up to a million debit orders are disputed every month with SA’s major banks. Typically, these fraudulent debit orders are for small amounts under R100 in the hope that the account holder won’t notice them.
Stop paying for things you no longer need
Some debit orders may be legit, but unnecessary, and should have been cancelled months ago. Such orders may include things such as the extra insurance you took out on your cell phone, or the extended warranty on the TV and so on. You might have gotten rid of the appliance or device in question, but forgotten to cancel the insurance.
Pay off your debt faster
Make sure all your loan repayments are up to date. If you can, increase the amount you pay back each month. You will be surprised how just a little extra every month will reduce the loan term and the interest you pay over the term of your loan. Be circumspect about the debt you enter into. Remember that ‘good’ personal debt is there to provide a legitimate leg up. Bad personal debt, on the other hand, only serves to increase consumption and gets you further into debt. Know the difference.
How much are you paying for credit life insurance
If you currently have a personal loan, you will have credit life insurance. Banks require this as security for your debt should you become unable to service your loan repayments due primarily to death, disability or retrenchment.
You are, in fact, not obligated to take this insurance cover with the bank. Instead, there are more affordable options with better benefits available.
Even on an existing loan, you can switch your credit life insurance to an independent provider like Yalu that offers lower rates and benefits without any repercussions for your loan as long as there is no break in cover. You should not be paying more than the capped rate of R4.50 per R1 000 loaned, but preferably less. Your premium should reduce every month in line with your reducing debt balance.
You can save a significant amount of money on the credit life premiums and rather reinvest that savings into paying your debt off faster. In the end, you save on the interest charges as well as the costs of the credit life insurance.
Get a handle on your spending habits
A lot of spending happens because of our habits and routine rather than necessity. The Saturday morning breakfasts, drinks with friends after work, the take-out lunches because you woke up too late to pack a lunch. Revisit your habits, and nip in the bud those that tempt you into unnecessary spending traps.
Watch free trials and auto-renewals
Some software or app trials will ask you for your credit card details. They will then bill you the full amount when the trial period is up.
If you are not going to keep the subscription, put a note in your diary at least 10 days before the end of the trial to cancel the subscription.
Likewise you may subscribe to a service on any annual basis. Make sure the auto-renewal is not on, or that you are at least prompted to confirm whether you would like to renew for another year or not.
Don’t pay for what you won’t use
Be brutally honest with yourself – how often do you use the gym membership or loyalty club subscription that costs you money every month? Do the ‘loyalty’ points and benefits really justify the cost?
Draw up a budget and stick with it
A budget is a great way to keep your finances and budget on track as to how and when you spend your money. When you budget consistently and stay on budget, you can start making things happen so that you reach your financial goals.
When the going gets tough, the tough get going. That means being diligent about your budget and spending habits. The cumulative impact of all your cost-cutting measures can have a dramatic impact on your financial position and the money you’re able to save and put away for the future. Start small today, and build.
For more information on Yalu go to www.yalu.co.za.