Of Debt counselors and reckless lending

Recent discussions I had with some learned friends and coincidental news reports urged me to write this article.
As we all know by now Debt counselors are those merry men and women that irks debt collectors and banks alike to the nth degree while in the process masquerading as the saviour on the white horse helping those in dire need of rescue.
To define Reckless lending so that the man in the street (or the one reading my article) is that which banks and other credit providers do to keep debt counselors in business. They all have a model to calculate how near they can come to the fine line of reckless lending.  But again with the help of a Debt counselor friend of mine we did a test on about 100 clients of his and every single one of them could call foul ! " I have been recklessly lent to" The real problem is however far from just reckless lending resulting in countless consumers visiting countless debt counselors to create a sub economy of debt counselors driving around in new Mercs (which by the way has been financed by the same banks that are irked by the debt counselors - probably in a reckless manner)
Now that you all understand the terms here is my view of where the whole problem lies :  Actually it lies with the Mainly with the Lenders and to a small extend the consumers.  The consumers (a vast majority of them anyway) are totally oblivious of how credit works and the Lenders like to keep them there so that they can reckless lend to them and keep the economy going.     Any attempt at educating them will in all probability be met with a smirk and a no ways from the Lenders.  Some however might offer to do such "borrower education" for their new prospective clients in a manner that will show he/she needs the money or item about to be financed.
Anyone agree here is a gap for a regulation or two ?   NO new debt before the lender has undergone a proper borrower education program by an independent qualified business entity with no links to any financier of any sort?   Why do I have to write a test to obtain a firearm but then I can go and throw away my family's future on reckless borrowing offered by reckless lenders with no-one to answer to ?

Credit and is pitfalls

Credit has been defined as the procedure of providing a loan. In this process, wealth is transferred from one party to another. I came accross this definition when looking for one for "credit" The first part is precisely right. The second part is also right but not in the sense it was written. The wealth is transferred to the lender not the borrower. Debt and all its implications are transfered to the lender.
Our Western society thrives on Debt. If you do not have a "Credit record" you are the scum of the earth. I wish I could have half an hour with the youth of today and none of them will even think of credit again.

Why ?
Have a look at this :

1. Income R 20 000 per month
2. Car payment R 4000 ( R 180 000 car bought over 60 months)
(Average R1000 per month is interest)
3. Homeloan R 5000 per month (R520 000 homeloan over 20 years)
( R4332 first month interest)
4. Clothing account :
( R 500 per month )
( Clothing accounts are designed to charge no interest - however their products are at least 2x more expensive than when you have the cash !
5. Credit card R15 000 limit ( normally fully utilized)
Whatever the repayments are the interest per month on such a card is at least R300 per month (24% interest rate)

Because of his 'CREDIT WORTHINESS" This guy is paying over R 5882 per month interest to the bank -
But the scary things are : Over the period of his homeloan he will have paid the bank R680 000 interest - more than the price of his home
He would have paid the bank R 60 000 interest for his car over a period of 60 months.
He will be paying the bank R 3600 interest per year for the "Privilege" of using a credit limit of R 15 000 on his credit card !
He will be paying at least double for his clothes because of a 6 month credit line for the rest of his life !

99% of young working people fall for the credit trap in one way or another and keep the banking system afloat. To such an extend that the taxpayers have to sometimes step in without their knowledge and "save" a bank like Absa to the tune of R 1.4 billion ( see the lifeboat story in 1999) And now ladies and Gentlemen comes the big question: What does the bank do with your money? Sponsor the Rugby ?

Before seeing a debt councillor: Be Warned !

Your choice to go and see a debt counsillor most probably have been influenced by very crafty advertising. Or it is an act of desperation. It should be the absolute LAST thing you do if you feel financially pressurized.
I said the LAST thing , I did not say you must not see one – It is like Anti-biotics: it is a life threatening neccessity: If you know you will die without taking it, then take it and do not worry about the consequences. But if your life is not threatened investigate other options.

It is the same with debt. If there is no other option then go for debt review. But know the consequences.

Did you know that you are going to be required to do a proper budget once you have seen the debt councellor ? Do you know he is going to minutely scrutenize the budget and then make recommendations as to the amount of money you will be offering your creditors? This will adversely affect your credit record for years and maybe even decades !

Why am I telling you this ? Because there are alternatives.

We are presenting one hour free sessions on the subject. All you have to do is book !
There are other options ! Take control of your financial health and keep control !

082 222 5002

Personal budgeting course

Our next personal budgeting course will run on Saturday 10 APRIL 2010 in Centurion. The course reguires a investment of R 500 (spouse can attend for free). The candidates will have 3 x follow up sessions to determine their success in applying the learning material. The course is SAQUA alligned but no assesment is done. This will give you the tools to be out of debt in 5 years (including your house) if you stick to the rulespla.

This might just be the best R500 INVESTMENT you have ever made in your family
fULL DETAILS AVAILABLE WHEN BOOKING IS DONE
Phone us now - Places are filling up fast

0828051615

email : finance@brandow.co.za

The “dubious” joy of personal financial budgeting

The “dubious” joy of personal financial budgeting
Why does most people avoid creating a budget and fewer still stick to one. We will assist you in facing this giant and conquer it
If you're the type of person who always has plenty of cash, knows exactly where every penny goes and never has trouble paying bills, skip this chapter. You're either too rich or too smart to need it.
Normal people like you and me unfortunately, have to do - and stick to - a budget as an essential tool for ensuring that our money gets used the way we need it to. You may think that you have more than enough money but the homework involved in drawing up a budget can be instructive, since you may find that you are spending more than you wish on luxury items , electronic gadgetry or restaurant meals and other such nice things !
Denial is a major problem in the budgeting process. Most people do not want to face their giants. They do not want to know where the money goes – it is thus easier to just spend it! This is a major impediment to budgeting. Having bought stuff that you don’t need and basically very seldom use is sometimes just a brag thing – I have a better sound system than you. Keeping up with the Jones’s kind of a thing.
The bulk of budgeting pains are in the beginning – getting used to some form of discipline. Sometimes it involves a pride to be gotten over – You wife or significant other might not like the discipline and this might just give birth to subjects for “discussions”
Drawing up a budget is one thing – sticking to it is the next hurdle. Once you have the budget in place monitoring it should become a habit. For this specific reason we have introduced into our course a bi-monthly meeting (which you commit to with initial training) and your improvement ( or lack there-of ) is tracked. We supply you with the electronic tool to do this

The “Joys” of Budgeting

The “Joys” of Budgeting
In the next few weeks the postings on this blog is going to focus on personal budgeting
We have developed a full one day course covering these aspects and showing students
(grown up ones and potentially rich ones at that) how to do a personal budget and stick to it. If you follow our guidance you can be out of debt (totally and forever) within 5 years. No Bull and this includes your house !
1. Budgets are a necessary evil.
But it is the practical way to know what you’re spending - and to make sure your money is being used the way you intended it to be used. This is a discipline thing ! – we are going to talk about that a lot
2. The following are the basic steps in creating a budget
a. First determine what you are spending your money on – use a template available from us.
b. Determine your long term financial goals and evaluate your current spending against that
c. On a monthly basis track your spending to make sure it stays within your determined guidelines.( again using the template supplied by us)
3. . Don't be too finicky
When you use a computer program to do your budget you can get bogged down into too much detail. Detail is good – too much is not. Once you have gone through your prioritized detail and decide what to expand and what to cut out and the sums have made sense focus on these and worry less about other aspects of your spending.
4. The dangers of drawing too much cash and too regularly
If you find that you have drawn R1000 today and tomorrow you need to draw money again you might have a thief around – You ! Readily available cash in your wallet is a drawcard for unnecessary spending. Keep n little black book and keep record of what you are spending your cash on
5. Spending beyond your limits is dangerous.
But if you do, you are amongst good company(or bad ones depending on how you look at it )
You will need to make some serious efforts to cut back – the discipline thing !

6. Beware some luxuries disguise themselves as necessities.
A Budget should balance with the “surplus” being a surplus (+) and not a deficit (-) at the end of the exercise. It is when luxuries disguise themselves and you spend on them thinking it is a necessity that the balance is thrown out
7. The 10% rule
Your budget should ideally show spending of a maximum of 90% of your income – that way you will be saving 10% every month ! This should ideally go into a notice deposit account – you must not be able to draw it without giving notice.
8. The extras.
Don’t count “possibilities” into your budget. Bonuses , tax rebates etc should be windfalls and should ideally be going into the notice account !
.
9. Beware of inflation
As your income increases over time and you start earning more money discipline can easily go out the window. Use this extra money as part of your long term goals. Notice deposit !
10. Last but not least = Discipline
If you lack this and do not keep to these rules debt councillors are in your future ! Sure Sure !