The importance of budget calculators in addressing debt

With analysts predicting that household debt-to-income ratio in South Africa is expected to reach 75% by the end of 2022, most people in have some sort of debt troubling them.

The growing statistics mean that for every R100 a South African has, R75 goes towards paying off debt. 

With the ever-increasing cost of living, paying off debt can put consumers under immense pressure and in need of proper management strategies to enable a culture of saving.

According to Alex Ollewagen, client solutions actuary at Metropolitan, attaining financial freedom requires proper debt management – leading to financial security in the future, something everyone aspires to achieve.

Ollewagen maintains that financial success depends on our ability to manage debt. The more we know about debt, the better we can effectively manage our finances and work towards our financial goals.

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“Managing your debt better today is crucial to create money for saving, which is an important step on your journey to financial wellness.

“Metropolitan prides itself in walking the journey with clients in good and tough times.

“During these challenging times that see the increasing price of everything from food to fuel, Metropolitan wants to assist South Africans to manage their debt more efficiently.

“This will free up some money for saving instead of it being used to pay off debt.

“When it comes to managing debt, some tried and tested strategies can help you gain control of your finances.

“Probably the most important one is to draw up a budget with all your income and expenses,” says Ollewagen.

The financial services company has come up with a budget calculator, Ollewagen describes as “a handy tool that consumers can use – not only to create a monthly budget but to also get a bird’s eye view of the state of their finances every month”.

“This will enable more informed decision-making around money management,” adds Ollewagen.

In addition to having a budget, it is also important to have a view of your debt. This can be done by listing all outstanding payments on credit cards, personal loans, and other bills you owe.

The cost of debt calculator has been found to be “a perfect tool to assist with managing debt and calculating the real cost of credit purchases”.

Ollewagen: “By using these tools, you can also avoid the pitfall of easy credit and signing up for unnecessary credit like retail accounts.

“Furthermore, you will realise the importance of paying off credit cards or personal loans sooner by paying more than the minimum payment each month and saving on interest charges in the long run.”

The final component of financial wellness and enhanced debt management is having the right financial advisor to partner with you on your journey to financial freedom.

It is important to speak to an accredited financial advisor to become your coach on money matters.