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Financial Planning
Thursday, June 1, 2006
Managing the debt trap

Few people realise the importance of taking control of their finances.

“By knowing how much you owe, you are able to determine how much you can actually afford to spend once the bills have been paid. As simplistic as this might sound, this is the first step towards gaining control over your finances,” says Georgina Ross, Product Manager of FNB’s One Account.
By managing your debt you will know where your money is going. It will also help you figure out crucial details like whether your expenses are greater than your income. Or what portion of your income is dedicated to paying off expenses.
Another rule of thumb is to ensure the term of the debt is no longer than the lifespan of the product you are financing.
Yet another tip is to keep track of interest rates being charged on various accounts, say, as between various retail and credit cards, you may will be able to focus on paying off those accounts on which the higher rates are being levied, paying off the cheaper loans last.
“For some, this might be easier said than done. We realise that today, the average consumer has a lot of retail, credit card and property debt to consider. Therefore, taking charge of their finances might require a helping hand.
“This is why we introduced the One Account, which allows property owners to consolidate all their banking into one account on which they are charged the lowest interest rate. The solution we have introduced to the market is not entirely new, having been available to high net worth individuals for some time,” she says.
However, the One Account is available to a wider segment of the population. Not only does it allow you to establish the extent and cost of your debt at a single glance, you can immediately receive the benefits of considerably lower, home loan-based interest rates.
“Because you know the extent of your debt on the account, you can use the debt manager tool to accelerate the payments on specific shorter term debts as you see fit. The result is considerably greater control over your financial health.”
Gail Roberts, CEO of FNB’s One Account, says the product includes banking online so you can be in control of your finances at all times. You no longer have to stand in a queue. If you have access to the internet you can time your regular payments so that they are made at the last possible moment, saving you interest costs. By the same token you can prevent late payments.
And because your salary is deposited into one account, you save on interest because it automatically reduces the outstanding balance.
 

Copyright © Insurance Times and Investments® Vol:19.3 1st June, 2006
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