With all the current price increases, pretty much across the board, most consumers are going to find 2016 a difficult year to navigate financially.
“Everyone finds themselves stretched financially at some stage,” says Patricia Temba, head of collections at FNB Housing Finance. “With holiday debt still around, school fees having just been paid and interest rates up, you may find yourself with no breathing room, and your biggest and most important debt – your home loan – is suddenly a big commitment.”
Your home shouldn’t become one of the casualties of the tough economic climate, so here are a few things you can do to help you keep up with your bond payments and avoid the nightmare of your home being repossessed.
Find a freelance job to supplement your income
If your accounting books aren’t adding up – in other words, if you’re spending more than you’re earning – the hard truth is that financial ruin is just around the corner.
So if you’re feeling under pressure financially, why not consider taking up a freelance job or some means by which to earn an extra income that could help you pay your bond.
If you have an extra room in your house or a garden cottage standing vacant, you could rent it out for as long as it takes you to get on stronger financial footing.
If you find yourself in a tight bind, you could even consider cashing in your leave days if your company allows it.
“These aren’t long-term solutions, but can help to relieve the immediate pressure until you’re able to meet your responsibilities again,” Temba advises.
Cut out the luxuries and skimp on some of the “necessities”, if required.
A good starting place is to stop dining at restaurants or buying lunch at work. Pack a lunchbox, resist the urge to stop at the garage for that morning cup of coffee and if you can, quit smoking.
“Print out a bank statement and look at each expense leaving your bank account,” Temba says.
“More than likely, unnecessary expenses are coming off, whether it’s for pay TV, entertainment or even unnecessary banking fees. Each rand saved will help. There isn’t much point in having pay TV or ordering pizza if you don’t have a home in which to enjoy these luxuries.”
Never stop making payments
Even if you can no longer afford the full amount owed on your bond, don’t make the mistake of stopping payments altogether.
Instead, Temba advises that you make some sort of payment towards your home loan while you negotiate a payment plan with your bank, as it demonstrates a level of good faith on your part to honour your debt commitment.
By making partial payments, you’re also ensuring that the interest will accumulate more slowly than it would if you skipped payments – and you’ll have a better case to present to your bank against repossession, if it comes to that.
“There are a number of solutions the bank can offer you if you’re having financial difficulties,” she says. “However, it’s up to you to proactively take steps to help yourself out of the position you’ve found yourself in, in the first place.”
Reduce or temporarily suspend investments
It may not be the first port of call, but if you’re in a really sticky situation, you could consider pushing the pause button on savings contributions.
Be aware that this solution can’t be sustained over a long period, but it can be used over the short term to help you get back on your feet. These savings plans or policies should be reinstated as soon as your cash flow issues improve.
“This isn’t a long-term solution to solve your cash flow problems – and certainly don’t be tempted to cash out, as there are tax implications. But reducing your savings commitments for a few months may give you breathing space until you’re back in a position to service your debts and continue investing and saving,” Temba advises.
One last thing to consider is to approach your bank about renegotiating your bond repayment period to 30 years, if possible. You’ll be paying more as far as interest is concerned, but your bond will decrease, allowing for some wiggle room. You should be able to readjust your repayment period back to 20 years when you become more financially stable.