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Financial planners across South Africa are responsible for ensuring that their clients make sensible preparations for future financial requirements. One of the adviser’s major objectives is to ensure that clients take responsible steps to manage their finances. A sensible first step prior to implementing a savings plan is to focus on the eradication of debt.
Unfortunately, many South Africans are drowning in debt and the high interest charged on these debts. Theories abound as to why the problem exists, including financial illiteracy, poor lending practices and poverty. What is important is that individual borrowers acknowledge the part they played in creating the mess and take action to remedy the situation.
Help is at hand in the form of the National Credit Act of 2005. Section 34 of the Act relates to over-indebtedness and the restructuring of debt. According to the official website of the National Credit Regulator (NCR) (www.ncr.org.za) “the Act makes provision for the registration of debt-counselors to assist over-indebted consumers.”
How deep can one cut before you “bleed to death”? Cutting down on luxury spending is a good start but do start with your budget first. Being pragmatic is therefore the answer – revisit every expense line including your insurance portfolio. Call for quotes on each of those lines – personal insurance and asset assurance and put the challenge to the market! It is possible to reduce your personal risk premiums even though you are older now – you might have stopped smoking, have stopped your engagement in “dangerous sport”, acquired a qualification or even have increased your salary all factors that impact on your risk rating.
Analyze your personal asset insurance – those items you insured under specified items might not be used so frequently anymore – camping equipment, scuba equipment, golf clubs, etc. by including them under household contents (all risk) you may be saving some money (you can insure them when you use them – call your broker on departure). Many of your household items might be impossible to replace if stolen or lost in a fire (like library) so revisit the sentiment vs. assured sum and lastly when last have you checked your cars assured value against replacement value! (Have you cancelled your top up insurance once the car is 12/18 months old?).
In tough times every sent counts!
But finally do not be penny wise and pound foolish – qualify your risks and act accordingly. Changing your short term assurer might not be the best thing just before you go on holiday – if you do PLEASE read the small print and be aware of averaging so take note of inflation in your asset assessment as well.
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