Protect your bonus

2011-12-09 09:27

Experts warn South Africans fortunate enough to receive bonuses this month to adopt a sensible approach.

Protect your financial status by servicing your debt instead of going on a festive spree, is their strong warning.

Caution is advised as the economic outlook for next year is dimming fast. If the eurozone crisis is not arrested, the fallout will engulf the rest of the world and developing countries like SA are likely to be hard hit.

If the global economy dips into another recession, jobs will be lost, working hours cut and salary increases reduced drastically as companies’ profit margins get thinner and thinner.

It also means those that are unemployed may find it very hard to find employment soon.

There are those, however, who may take the more carefree route after another tough year.

Kim Royds, the managing executive for Absa Retail Bank, has cautioned consumers against this approach. She urged consumers to set aside a portion of their bonus towards servicing their debt.

“The biggest gift that anyone can give themselves is to invest a large portion of their annual bonus or any spare cash... towards easing their debt,” she said.

A large number of South African households are still in debt with the debt-to-income ratio still hovering at around 77%.

At a recent consumer forum held at the Gallagher Convention Centre in Midrand, Joburg, Minister in the Presidency Trevor Manuel lamented that South Africa is a nation of highly-indebted families.

There are 18.84 million credit-active people in South Africa, about 8.8 million of whom are described as having impaired credit.

“This is all as a result of spending money we have not earned yet and spent it on goods that we don’t need.

South Africa has a low savings rate and so people borrow money at emergency rates,” Manuel said.

Tshiwela Mhlantla, managing executive of Absa Personal Loans, urged consumers to start with servicing the most expensive debt. “They should always seek advice from their banks or registered financial institution,” Mhlantla said.

Peter Dempsey, the deputy chief executive of the Association for Savings and Investment South Africa, said short-term debt is expensive and should be avoided because interest rates charged on this debt are high.

“Long-term debt such as a mortgage bond is funding what is hopefully an appreciating asset, like your home,” Dempsey said.

“Once you have cleared your short-term debt, you should focus on repaying your long-term debt as quickly as possible.

If you do, you will save yourself a lot of money over the long term.”

Johan Borcherds, regional director at PSG Konsult, urged bonus earners not to spend all the money they receive.

“They must put some money away for some unforeseen expenses during the course of the next year,” Borcherds said.

Join the conversation!

24.com encourages commentary submitted via MyNews24. Contributions of 200 words or more will be considered for publication.

We reserve editorial discretion to decide what will be published.
Read our comments policy for guidelines on contributions.

24.com publishes all comments posted on articles provided that they adhere to our Comments Policy. Should you wish to report a comment for editorial review, please do so by clicking the 'Report Comment' button to the right of each comment.

Comment on this story
0 comments
Comments have been closed for this article.

Inside News24

 
/News
Traffic Alerts
There are new stories on the homepage. Click here to see them.
 
English
Afrikaans
isiZulu

Hello 

Create Profile

Creating your profile will enable you to submit photos and stories to get published on News24.


Please provide a username for your profile page:

This username must be unique, cannot be edited and will be used in the URL to your profile page across the entire 24.com network.

Settings

Location Settings

News24 allows you to edit the display of certain components based on a location. If you wish to personalise the page based on your preferences, please select a location for each component and click "Submit" in order for the changes to take affect.




Facebook Sign-In

Hi News addict,

Join the News24 Community to be involved in breaking the news.

Log in with Facebook to comment and personalise news, weather and listings.