Financial planning is all about making provisions for expected and unexpected events in the future. The nearest expected event on our calendar is the festive season which is just around the corner.
If you haven’t been saving for this costly event during the year then you have 4 pay days to go to create a nest egg to help yours through.

Savings for this short term need to be easily available and safe from the risk of losing any capital. Certain investments such as shares, property and bonds need more time and therefore should not be considered.

Here are 3 ideal places to stash your cash:

Access bond
My favourite for the short term as the money is easily available and effectively earns the rate of interest that you pay on the bond. You should save as much as possible here allowing you easy access to your extra cash over the festive season. You can access it at any time as and when you need money over the holidays and there is no risk at all.

Credit Card
Now is the time to make a move and pay off the credit card bringing it into a positive balance. You will do better with the extra money in the access bond as the interest earned on credit balances in the card are lower (around 4%). The big advantage is that when you get to the festive season you won’t have a noose around your neck charging you an interest of 24%.

Money market account
This investment is normally better than the different savings accounts on offer by the banks. It generally offers higher interest and is more accessible which is what we are aiming for by December.
You should open up a money market account with your bank and then manage it next to your current account on your Internet banking profile. For the next 4 pay days, when you get your salary, keep as much of your money in the money market account during the month and as little as possible in your current account. Transfer from the money market accounts to the current account as and when you need to. Effectively earning some interest instead of nothing in a current account.

You can take charge of your financial needs by planning for them. If you save even a little for the next few months your festive season will be that much better than having nothing at all and having to make the fatal mistake of borrowing to get through.

The management of the emolument attachment order known as a garnishee order has been changed through a judgement from the Constitutional Court. Essentially the decision of whether a salary can be attached by a garnishee order can no longer be made by the clerk of the court. It has to be made by a magistrate.

The test

The magistrate has two tests to look at:
Whether it would be just and equitable to grant a garnishee order
What the debtor will be able to afford.

Debtors still have to pay

The judgement does not in any way mean that debtors no longer have to pay. What it aims for is the fair and equitable attachment of one’s salary to make sure that they pay their debt and can continue affording their lifestyle into the future.

What is unsecured lending?

Unsecured lending differs from secured lending in that there are no assets attached to the loan. Banks own your home and your car until you pay the debt in full. If you default they have the asset which they can sell off to recover the debt. As an unsecured loan has no security the risk is that much higher for the lender so to compensate a much higher rate of interest is charged. These rates can be as high as 38% effectively per annum.

So, there is another layer added to the control of lending in SA. Magistrates will be involved in deciding on the fairness of attaching your salary to secure the unsecured loan. Affordability will be central to the decision.

Loans are not bad

Loans are not all bad if you can comfortably afford them. If you borrow to get out of debt then you are in trouble. Short-term loans can be useful for unforeseen expenses provided you can repay them quickly. Of the current 20 million credit-active South Africans half are three months or more in arrears on some form of debt.

The big problem is that they are excluded from borrowing in the future which has a huge effect on the economy.

Be careful

We should tread wearily when considering a loan. The cost of debt diminishes our ability to save. Saving for the future is the only way to improve our financial independence.