For many who aspire to own their own home, buying a property may seem to be forever out of reach. With the National Credit Act and banks’ strict home loan lending criteria, it is not exactly easy to get finance and few people are managing to save for a deposit.
South Africans are not known as a nation of savers and statistics show that the majority of adults do not think or plan ahead financially.
However, scrutinising and changing your spending habits is the first step towards freeing up cash that you didn’t know you were simply whittling away.
Adrian Goslett, the CEO of RE/MAX of Southern Africa says that saving can and should become a way of life. “Before government clamped down on irresponsible lending practices, it was easy to secure credit for just about any purchase, big or small, with little or no deposit.”
However, these days’, he says, banks take a far-closer look at a home loan applicant’s finances - the overall picture of the credit history, the total amount of credit that is outstanding as well as the lender’s ability to pay debt back. “Banks have also increased the amount of the deposit required to secure larger amounts of money, including bonds or vehicle finance, although this is once again dropping.”
Goslett says that in many ways the recession exposed our weaknesses and highlighted the importance of having a household ‘slush fund’. Those who had spare cash in the bank were, in many instances, able to keep the wolf from the door, while those that were swamped by debt didn’t.
With this is mind, Goslett says that it is now more important than ever for those planning to invest in property to get their finances under control and implement a budget, before they buy property.
He says there are a number of ways people can cut back on living expenses:
- Writing out and sticking to a budget
- Eating out less
- Shopping around for the best prices
- Paying cash wherever possible
- Reviewing insurance policies and medical aids to ensure you are getting the best deal available
- Saving on electricity and water costs
- Curtailing unnecessary purchases and debt
- Draw up a savings plan, decide how much you want to save on a monthly basis and stick to it
Managing debt has become one of the most important aspects of life in South Africa. It has been estimated that seven million South Africans are struggling to pay off their debts and it was recently stated that over 52% of South Africans have a bad credit rating. “These figures are alarming, given that the banks have taken a far stricter approach to credit and will not extend finance to anyone whose financial history is not squeaky clean,” says Goslett.
The ratio of household debt to disposable income has proved to be the biggest stumbling block facing those who are trying to raise finance.
“On the other hand,” he says, “individuals who have money set aside for a deposit are finding it easier to buy the house of their choice and are taking advantage of the good deals currently available. It is distressing to note that while the current market conditions are ideal for investing, many are unable to invest, simply because they have failed to get their financial house in order over the last few years.”
While this advice may not be the be-all and end-all of money management, it is a good starting point towards financial success.
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