Module 3: Controlling your money

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Information centre: Financial wellness

Good money management revolves around making choices: living within your means, saving for rainy days, managing your credit, and repaying monthly instalments.

Learning outcomes

What is money control/management?
Understand how to manage your payments wisely.
Understand the different options to repay debt.
Understand the different support/solutions for when you are financially distressed.
Understand your rights and responsibilities as a consumer in financial distress.
Identify key tips for consumers with financial stress and apply general money control tips.

Introduction

Part 1

Part 2

Controlling your money

We need to have control over our money to ensure that we have financial wellness and balance in our lives. We need to manage it properly so that it does not manage us. Money management begins with knowing where your money goes. Good money management revolves around making choices: living within your means, saving for rainy days, managing your credit, and repaying monthly instalments. Having too much debt can negatively impact your finances. It is therefore very important to know what you can do to manage your payments and debt effectively.

Here are a few pointers to guide you when controlling your money:

Make a list of all your debts with their monthly instalments.
Pay off small debts as soon as possible while maintaining monthly payments on the rest of your debts.
Remember to make car and house payments on time as they can be repossessed by the bank if you fail to do so.
Keep to your budget and maximise your savings.
Use your cards responsibly and for appropriate purchases.
You can cut many years off your bond repayments if you pay more than your contractual instalment; pay it off quicker and you improve your cash flow.
Look out for unregulated loan sharks and make sure that when you borrow money that you do it from a credit provider that is registered with the National Credit Regulator such as Bayport Financial Services.

Your repayment options

You must ensure that you adhere to the repayment terms that you agreed to when you signed your contract. Many credit providers have enabled customers to pay their bills securely and conveniently in the following ways.

Debit orders: Always make sure that you have sufficient money in your account to cover your debit orders. If a credit provider debits your account and there is no money in your account you will pay a penalty fee for that returned debit order, by both the credit provider and your bank. At Bayport Financial Services, we make use of the Debi-check process to protect our customers from unwanted debt orders.
Cash payment: If you are paying cash make sure that you deposit the required amount on time every month to avoid late payments that will reflect on your credit bureau status.
Internet transfers: This is when you load the credit provider you owe money to on your beneficiary list on your internet banking profile. It is a great way to pay retail accounts and credit cards as you avoid standing in long queues to pay cash.

Financial stress can stem from being in debt, not earning enough money coupled with the increasing cost of living and unforeseen expenses which had led to debt being increased

Apart from budgeting, money management, and personal finance lessons, you can reduce your financial worry by contacting your credit providers when you encounter difficulty in making repayments. Your credit providers will try their best to accommodate your situation which in turn will enable you to focus on other important areas of your life and relax, knowing you have a plan to handle your financial situation.

Here are a few ways in which your credit providers and financial service providers may be able to assist:

Payment arrangement	Contact your credit providers if you cannot afford your monthly repayments because of an emergency or other personal reasons. This should be done before you default on any payment; if you wait until after you have defaulted, that reflects bad behaviour and will negatively impact your credit score. This payment arrangement works well if you are experiencing a temporary problem.
Rescheduling	A longer-term solution is rescheduling. You can ask your creditor to reduce your instalment by extending your term or lowering the interest rate, or both. This will then increase interest and the total cost of the loan but will make it more affordable to repay every month.
Claim on insurance	If you have credit life insurance for your loans, make sure that you act quickly in the event of death, retrenchment, disability, short-term loss of income, or dismissal. Refer to Module one to better understand what is Credit Life Insurance.
Payment break	Find out from your credit provider if they can give you a payment break on your loan to recover from your short-term distress.
Loan Consolidation	Debt consolidation entails taking out one new loan to pay off many others. Usually, the consolidator will obtain settlement quotes from your other creditors and will settle these debts for you. Many people use this option because they prefer to have one loan to repay instead of many.
Debt counselling	When your monthly household expenses exceed your net available salary prior to any debt repayments, you are considered to be over-indebted. This also implies that affordability is not sufficient to repay any consolidation loans. Debt counselling is done by an authorised debt counsellor and is a process of assisting consumers that are experiencing debt-related problems through budget advice, restructuring of payments, negotiating with credit providers on their behalf, monitoring their payments, and providing after-care services. Debt counsellors are registered with the National Credit Regulator.
Debt Administration	This is where you get a debt administrator to arrange to pay off your debts. The administrator will apply to the court to have some of your income set aside for basic living expenses, and the rest will be used to pay off credit providers. You will need to determine how much you have to repay your debt each month, and you will pay this amount to an administrator who will make a distribution payment to each creditor every three months. To qualify, your total debts should not be more than R50 000.
Sequestration	Sequestration is the remedy for an over-indebted consumer. It is an effective solution if it seems that you will never be able to pay off your debts. You can apply to a court to be sequestrated if you have sufficient assets to sell to ensure that your creditors will receive at least 10 cents for every rand that you owe.
Voluntary surrender of goods	This process is where you choose to surrender your goods, which you have bought on credit. For example, if you have bought a vehicle on credit, you can choose to give the vehicle back when you are unable to make payments. The retailer will sell it and you will only be liable for the difference between what you owe and the amount recovered from the sale of the vehicle.

Your rights and responsibilities when you are over-indebted

There are regulations that guide your rights in relation to credit. You should, at a minimum, be familiar with the National Credit Act, the regulations, and your rights. Being aware of your rights and the responsibilities of creditors, lenders, and other businesses in the credit industry will help you know how to properly respond to issues that arise.

Here are some notable rights and responsibilities that you should be aware of:

You should contact your credit provider to discuss your situation as early as possible and negotiate an affordable repayment plan. If you cannot reach an agreement with your credit provider, you may contact a debt counsellor in your area (when you are under debt counselling you will not be able to get further credit until you have settled all of your debts).
Access and challenge information held by a credit bureau. See Module 1 for the Credit Bureau contact details
Be aware that the credit provider will probably intend to report negative information about you to a credit bureau before the credit provider actually reports you. Do not sign anything that you do not agree with.
Raise the defense of “prescription” if you have not paid or acknowledged a debt for more than three years and no judgment has been taken as you can refuse to pay off the debt.
Challenge the balance if the interest and charges are more than double the balance at the time of your default.
Get an update of your balance from the attorneys every three or six months.
Negotiate a reduced payment if you cannot afford the monthly deduction from your salary via emolument attachment order; if the creditor/attorneys refuse, you can approach the court. You can also approach the court if your property is attached to be sold after judgment to arrange to pay the debt in monthly instalments.
Receive a copy of your credit record from a credit bureau when you request it. You can get one free record per year, but the credit bureau may charge you a fee for any further records.
You have the right to have any mistakes corrected and to receive compensation for any costs you may pay in this process. Take up complaints directly with both the credit provider and bureau or, as a last resort, the Credit Information Ombud. Keep complete records of all communications.

Take a deep breath, sit down, and take a good look at yourself and your current financial situation. You need to write everything down in order to have a clear and true picture of your areas of concern and your priorities. You can then use the following recommendations to ease your financial stress and achieve financial wellness:

Talk to your family and discuss the situation openly. You may be surprised by their reactions and what they are willing to do to help out.
Make face-to-face appointments with your creditors. Present your plan to them and negotiate or get a lawyer if you can afford one.
Pay off the small debt first, and then move up the line. Two things you should never neglect are car instalments and house payments. Without transport, you can’t work, and without a home, you can’t live.
You will come to a point where you have more money in your monthly budget but don’t think for a moment you can start new debt – stick to your plan and pay off all the debt you owe. After it’s done, the satisfaction of having a positive bank balance, even saving money for special projects will make you feel great.
Reduce what you consume and do not waste. Cut back on your use of living expenses such as water, electricity, petrol, food and entertainment.
Grow/Make some of your own consumables such as vegetables, fruits, and bread.
Do your grocery shopping with a list and a calculator and don’t shop on an empty stomach.
Take advantage of “sales” and go bargain hunting.
Have a “no spend day” at least once a week – there are many wonderful things in life that are free.
Save, Save and Save some more, where possible.

Remember that there is no easy way to get out of debt. You must be committed to putting in hard work, dedication, and willingness to change are what you need to pull through. Learn more about your money plan in our next module, Your Money Plan.