By Sinazo Mkoko
The South African Reserve Bank (SARB) increased the repurchase rate by 75 basis points to 5.50% per year, with effect from the 22nd of July 2022. This is the biggest hike since 2002. In a statement released, SARB Governor Lesetja Kganyago said the global economy has entered a period of persistently high inflation and weaker economic growth. Many developing economies have yet to recover fully from the pandemic and global economic conditions remain fragile.
The reserve bank stated that last year saw the South African economy expand by 4.9% and this year the economy is expected to grow by 2.0%, revised up from 1.7%. “Growth in output in the first quarter of this year surprised to the upside, at 1.9%, stronger than the 0.9% expected at the time of the May meeting. Despite this outcome, flooding in Kwa-Zulu Natal and more extensive load-shedding are expected to result in a contraction of 1.1% in the second quarter. Growth in the third and fourth quarters is forecast to be 0.7% and 0.4%, respectively.”
The repo rate increase means that consumers will pay more interest on their loans, car and bond payments if you’re not on fixed interest. Administration Director and registered debt counsellor at Infinite Life, Ramona Singh, has shared a few tips to ensure that you can better manage debt, of any size:
1.Keep a track of who and how much you owe
Start with a list of all your debts. Include the creditor name and total amount of the debt. Add a monthly payment and set a due date. Use your credit report to confirm all your debts. It’s important to make sure you stick to this list. Don’t ignore it. Try to keep it up to date and check on it often.
2. Make sure to pay your bills on time
Missing payments will make things more difficult when trying to manage your debt. This will also increase your interest rates, so it’s best to avoid this as much as possible. Create alerts on your mobile phone or whatever application you can use to remind you several days before payments need to be made
3.Make a monthly payment calendar
Make use of a payment calendar to help you figure out what bills need to be paid on what day. Having an overview of all your outstanding payment dates will help you place when payments need to be made from the time of your paycheck.
4. Make some payment instead of nothing
If you cannot afford to pay anything, at least make the minimum payment. This won’t help you in the long term of paying it off but it keeps your debts from growing and will also ensure that you have a good reputation with your creditors.
5. Deciding what debts to pay off first
It’s generally best to practice to pay off credit card debt first due to the higher interest rates than other debts. See which credit card has the highest interest rate and make this a priority.
6. Pay collections off
Never sacrifice your positive accounts for those that have already been affected by your credit. Remember you can only pay as much as you can afford. It’s important to note that when you have limited income, you must focus on keeping your accounts in good standing.
7. Using an emergency fund as a fallback
If you don’t have access to savings then you will go into more debt to cover an emergency expense. Having a small emergency fund can help cover little expenses that could come up now and again. Work towards creating an emergency fund and growing it over time to the point where you have a 6-month reserve built up.
8. Make use of a monthly budget
A monthly budget is what gives you full control over your finances. It can help you track your spending as well as finding problem areas with payments. A monthly budget will even help you fix bad spending habits. Remember, your budget should be able to cover all your expenses that are needed, then you can cut out the things you’re overspending on.