1. Understand compound interest.
As Albert Einstein once said: “Compound interest is the eighth wonder of the world. He who understands it, earns it... he who doesn’t, pays it.”
Compound interest takes into account not only the original loan (or savings) amount, but also accumulated interest of previous periods. (See table from Investopedia below.)
This shows how much money you can save by paying off loans quicker, and how much you can earn by starting to save as soon as possible.
Direct any excess cash into your bond or high-interest debt to pay it off quicker and reduce the interest bill.
Improve your credit score by paying bills on time, paying more than the minimum required amount, and reducing your overall debt levels.
A better credit score will allow you to benefit from lower interest rates. TransUnion (www.transunion.co.za) and other credit bureaus allow you to check your credit report for free once a year.
4. Switch bank accounts to take advantage of perks and earn more interest.
Capitec offers the cheapest bank account in SA, according to Solidarity’s Bank Charges Report for 2016, followed by Absa, FNB, Nedbank and then Standard Bank. Also take into account the different banks’ reward programmes, and choose the best product to suit your needs.
If you have been a reliable spender and have stuck to the repayment terms, approach your bank and request to renegotiate rates on existing debt.
Take advantage of the tax relief offered by facilities such as tax-free savings accounts and retirement fund contributions. (Also see page 24.)
Re-evaluate your medical aid, funeral and insurance policies and premiums to ensure that you are getting the best deal.
Hippo.co.za allows you to compare insurance and other personal finance products from a range of South African brands.
8. Understand your medical cover.
Be aware that medical doctors do not charge the same rate as your medical aid pays, advises Virath Juggai, risk specialist at Gradidge Mahura Investments. “You would be well-advised to take gap cover if you are on a medical aid that does not cover you at private rates. Get as much information as possible on what your cover is,” he says. Consult with a well-informed adviser who can take you through a needs analysis and then help you choose the appropriate plan.
9. Ensure that your life and disability cover meet your needs and those of your family.
Consult with a certified financial planner who can do a detailed financial needs analysis that will show you the impact on your savings and dependants if you pass away or suffer some event that renders you unable to earn an income. Once you are clear on the amount of cover needed, product choice becomes important, Juggai says.
10. Compare the cost and features of financial services products before committing to one.
Independent website Fincheck allows users to compares 36 financial services products currently being offered by