Latest news with #FinFix
The Citizen
20-07-2025
- Business
- The Citizen
Can you really afford another emergency?
The past five years showed South African consumers that an emergency can happen at any time and that it could happen to each one of us. Emergency funds are top of mind for many consumers since the implementation of the two-pot retirement system in September last year, as the system was designed to give consumers a little access to their retirement savings in the case of emergencies. Christiaan Coetzee, CEO of FinFix, says South Africans are under growing financial pressure, with households increasingly running out of money before month-end. 'Savings remain low, with consumers saying they would not be able to cover an emergency expense of R10 000 without borrowing or selling something. 'These sobering realities highlight one key financial truth: without an emergency fund, many consumers are one crisis away from economic freefall. Whether it is a medical emergency, job loss, or an unexpected car repair, financial disruptions are inevitable. The real question is: How prepared are you if a problem arises today? 'With South Africa's official unemployment rate at 32.9% and inflation eating into disposable incomes, even a minor financial disruption can trigger a downward spiral of debt, defaults, or worse, total financial collapse.' Coetzee points out that emergency funds serve as a financial shock absorber, providing peace of mind and preventing the need to turn to high-interest debt or predatory lenders in times of crisis. ALSO READ: Here's why you need an emergency fund – and it's not to buy new golf clubs How much should you save for an emergency? Coetzee says a common rule of thumb suggests that to be financially safe you should aim to set aside 3 to 6 months' worth of living expenses for emergency needs. These funds are intended to cover unexpected expenses or income disruptions. He says there are two primary reasons to dip into your emergency fund: spending shocks and income shocks. 'Spending shocks refer to relatively common, unanticipated expenses that might include costs such as unforeseen healthcare needs, home repairs, or other urgent, unplanned expenditures. To prepare for potential spending shocks, experts recommend saving at least half a month's worth of living expenses as a starting point. 'Income shocks occur less frequently but tend to have a more significant impact. These include situations such as sudden job loss or a substantial decline in income. To safeguard against income shocks, many financial experts advise maintaining enough money in your emergency fund to cover 3 to 6 months' worth of living expenses.' When should you use your emergency fund? Coetzee says deciding whether to use your emergency fund can be tricky. 'While it exists to provide financial relief during challenging times, it is crucial to use it wisely. ALSO READ: How to build your emergency financial safety net What constitutes a real emergency? To determine if a situation qualifies as a true emergency, he says you must ask yourself these questions: Is the expense unexpected? Is it necessary? Is it urgent? 'If the answer to all three questions is 'yes,' it may be appropriate to use a portion of your emergency fund. However, avoid dipping into your savings for non-essential or discretionary expenses, as this could undermine the purpose of the fund.' ALSO READ: Two-pot retirement system: rather set up a separate emergency fund How to start an emergency fund Coetzee says even if you live pay cheque to pay cheque, starting an emergency fund is still possible by:
The Citizen
28-06-2025
- Business
- The Citizen
Are you a young professional? Here's how to avoid the debt trap
Beware! With fulltime employment, creditors are eager to help you accumulate debt. As a young professional it is easy to get caught up in all the 'must-haves' such as shiny wheels, a branded briefcase or expensive shoes. All bought on credit of course! However, once you have bought all the trappings a young professional needs, you can end up with a mountain of debt that you probably will not be able to afford to pay off. Christiaan Coetzee, CEO of FinFix, says starting your professional journey is exciting with a steady income, financial independence and the ability to finally say yes to things you have been putting off until you start working fulltime. 'But with this newfound freedom comes responsibility, especially when it comes to credit. South African youth are increasingly vulnerable to debt traps, often lured by the promise of 'buy now, pay later' without fully understanding the consequences,' he warns. ALSO READ: Will South African youth achieve financial freedom? — Tomorrow's leaders drowning in debt today Uptick in debt among young professionals Recent data indicates a significant uptick in credit usage among young South Africans. According to TransUnion's Industry Insights Report for the second quarter of 2024, the number of credit-active consumers grew by 4.7% year-over-year to 18.5 million, with Millennials and Gen Z accounting for 62% of new credit originations during the quarter. Notably, Gen Z's share of new credit card accounts increased by 22.7% year-over-year. Coetzee points out that while access to credit can be a powerful tool for building a financial future, it also poses risks if not managed carefully. The same report highlights that 33% of consumers intend to apply for a new personal loan in the next 12 months, indicating a growing reliance on credit to manage day-to-day expenses. Therefore, Coetzee says, understanding how to navigate this credit landscape is crucial to avoid falling into debt traps that can be obstacles to your financial goals. ALSO READ: 'Under pressure': South Africans struggling to keep up with debt repayments Coetzee has these five practical strategies for young people to stay out of the debt trap to keep in mind: 1: Understand the full cost of credit and debt 'Remember credit is not free money. Whether it is a credit card, clothing account, or personal loan, each comes with interest rates, initiation fees and service charges that can accumulate quickly.' For instance, a personal loan from a non-bank lender carries a delinquency rate of 40.6%, indicating higher risk and potential cost. Delinquency means if you do not pay. Before committing to any credit agreement, request a detailed breakdown of the total repayment amount and compare it to the cash price to understand the true cost and see if you can afford it. 2: Live within your means It is tempting to upgrade your lifestyle with your first pay and buy new gadgets, trendy clothes, a fancy car or go on more outings. However, Coetzee warns that succumbing to lifestyle inflation can lead to overreliance on credit. The TransUnion Consumer Pulse Study found that 52% of consumers have cut back on discretionary spending, indicating a need to prioritise essential expenses. Coetzee says it is a good idea to consider implementing the 50/30/20 rule, where you allocate 50% of your income to needs, 30% to wants and 20% to savings and debt repayments. ALSO READ: Leaving the nest? Here are 5 harsh financial truths to remember 3: Build and stick to a budget to avoid too much debt Budgeting empowers you to take control of your finances by providing a clear picture of your income and expenses. With the rising cost of living, many South Africans are turning to credit to manage expenses, but Coetzee says it is better to use budgeting tools or apps to track your spending and identify areas where you can cut back, to ensure you live within your means. 4: Keep an eye on your credit score Your credit score affects your ability to secure loans, rent an apartment and can even affect your employment opportunities. You are entitled to one free credit report every year, allowing you to monitor your financial health. Make sure that you regularly check your credit report to identify errors or signs of identity theft and take steps to improve your score by paying bills on time and reducing outstanding debts. ALSO READ: Debt Review: The good, the bad and the ugly 5: Get help with your debt before it is too late If you still find that you are struggling with debt, remember you are not alone. The National Credit Regulator reports that 18.1 million people applied for credit in the third quarter of 2024, a 3% increase from the previous quarter. Coetzee says you can reach out to organisations like FinFix for financial education workshops, one-on-one credit coaching and practical tools to help you manage and overcome debt. Empowering your financial future Credit, when used responsibly, can be a valuable asset in building your financial future. However, Coetzee says, mismanagement can lead to long-term debt and financial stress. 'By understanding the true cost of credit and monitoring your credit score, you can avoid the debt trap and achieve financial stability. Consider speaking to a registered financial adviser who can help you structure a plan tailored to your income, goals and debt profile.'
The Citizen
25-05-2025
- Business
- The Citizen
Beware: your overdraft can now affect your credit report and score
If you want to borrow money from now on, your overdraft will be included in your debts to assess your creditworthiness. While some South Africans banks have notified their customers, not everybody knows yet of the recent change in South Africa's credit reporting system, where banks are now required to report overdrafts if consumers are overdrawn by more than R500 for a period of 30 days. This provision of the National Credit Act came into effect on 1 March 2025 and represents a significant shift in how your creditworthiness is assessed, Chris Coetzee, CEO of FinFix, says. 'While this change brings some positive outcomes, it also introduces challenges that could have far-reaching consequences for consumers as well as the broader credit industry.' He warns that by including overdraft usage in credit bureau reports, affordability assessments will become more accurate. 'In the past, overdrafts were often excluded from these calculations unless you voluntarily disclosed it. This meant that lenders were sometimes working with incomplete information when assessing whether a borrower could afford additional credit. 'With overdrafts now included, credit providers can better evaluate a consumer's true financial position, reducing the risk of over-indebtedness. For example, if someone consistently relies on their overdraft to make ends meet, this will be flagged as a potential indicator of financial strain.' ALSO READ: Bank data shows people run out of money long before month end Including overdrafts in credit reports promotes transparency Coetzee says the inclusion of overdrafts promotes transparency, ensuring that all forms of credit use are accounted for. 'This levels the playing field for both consumers and lenders. Credit providers will have a clearer picture of a consumer's financial habits, which may help prevent reckless lending practices. It also encourages consumers to be more mindful of their spending and borrowing behaviour.' Knowing that your overdraft usage will now be reported may encourage consumers to manage their finances more carefully. Overdrafts, which were previously seen as 'invisible' debt, will now carry weight in credit assessments. Consumers may be motivated to reduce reliance on overdrafts and focus on budgeting or seeking financial advice to avoid negative credit listings.' He says credit providers will now also be able to assess risk more accurately, leading to more sustainable lending practices. 'This could result in fewer defaults and a healthier credit market overall. While this might limit access to credit for some people, it ultimately protects both consumers and lenders from the fallout of unsustainable debt.' ALSO READ: This is how SA consumer class is cutting costs Will you qualify for credit if your overdraft is included? Many South Africans who rely heavily on overdrafts may find themselves unable to qualify for new credit facilities. Overdraft usage will now be factored into affordability calculations, potentially reducing the amount of credit they are eligible for. Coetzee says credit-reliant individuals, particularly those who frequently use payday loans or temporary credit facilities, may face financial strain if they can no longer access these options. This could lead to a cycle of financial distress if they cannot find alternative solutions.' Unfortunately, he points out, there will also be some unintended consequences for financially vulnerable consumers. 'Low-income earners or those living payday-to-payday are more likely to rely on overdrafts to cover basic expenses. Reporting overdraft usage could disproportionately affect these groups, as their financial struggles will now be more visible to credit providers. 'These consumers may see their credit scores decline, making it harder to access affordable credit. They may turn to informal or unregulated lenders, which could expose them to higher interest rates and predatory practices.' ALSO READ: How to build a strong credit score to unlock financial freedom Be careful how you use your overdraft However, Coetzee says, this could also lead to potential misinterpretation of many South Africans' overdraft usage. 'Not all overdraft usage indicates financial distress. Some consumers use overdrafts strategically, such as for short-term cash flow management. However, frequent or prolonged overdraft usage could be misinterpreted as a sign of poor financial health. 'Credit providers may place undue weight on overdraft usage, penalising consumers who are otherwise financially stable but use overdrafts as a convenience tool.' He says if overdraft usage is reported negatively, such as an overdue balance, it could harm consumers' credit scores. 'This is especially concerning for those who are unaware of the change and continue to use overdrafts as they did before. A lower credit score could limit your access to affordable credit options, insurance products and even employment opportunities in certain sectors.' ALSO READ: The link between your money mindset and your credit score Staying informed about your credit What can consumers do to stay informed about their credit? Coetzee says with overdrafts now being reported to credit bureaus, consumers must stay informed about their credit status. 'Request your free annual credit report from the major credit bureaus to ensure accuracy and address any discrepancies. If you frequently use your overdraft, consider creating a budget to manage your expenses more effectively. Look for ways to cut unnecessary costs or increase your income to avoid dipping into your overdraft.' He says if you struggle to manage your debt, it is a good idea to consult a certified debt counsellor. 'Debt counselling can help you to restructure your debt, negotiate with creditors and create a sustainable repayment plan. 'Consolidating them into a single loan with a lower interest rate could make repayments more manageable. For those who find themselves struggling, debt counselling offers a lifeline, providing guidance and support to achieve long-term financial stability.'
