Dear Member

I received this chilling letter and I thought to share with you so you are warned.

Dear Phumelele

I have worked for banks for most of my life. I never thought I would ever get retrenched. It happened last year, I was retrenched and found myself unable to keep up with monthly payments for my debts. I had credit cards, clothing store cards, personal loans, overdraft, a car loan and a home loan. I did my best to pay some of my debts but I couldn’t cope. My credit record has now been totally messed up. I lost my car and just when I thought I was going to lose my home too, I was offered a job by another bank. I was very happy and thought I was given a second chance to start over again. When the new employer found out about my credit record, they told me they could not employ me because of my poor credit status. I am shattered, I tried to negotiate but they wouldn’t budge. I owe so much money I don’t know where to start. I feel like I will be in debt for life. No one will lend me the money I owe because of my credit status. Now I have lost all hope and I think I’m going to lose my house too. What can I do?

Anonymous

My response to Anonymous

I wrote to Anonymous and advised her to try and find a job where her credit record would not matter. However, more employers now check your credit record before they offer you a job. So it is important for all of us to do our very best to keep our credit records clean. In an ideal world, employers would check when she got into the credit mess but then we don’t live in a perfect world. If you are going to be employed in a position of trust, employers want your credit record clean

What could Anonymous have done to keep her record clean?

I continuously write emails encouraging all of us not to get into too much debt. Life has no guarantees. You may have a good job today but there is no guarantee that you would have your job in the next month. It is therefore important for all of us to only get into debt that is necessary and good for us. Please see pages 5 to 6 of the book From Debt to Riches to find out what good debt is and what bad debt is

1. We should live our lives as if we were going to lose our jobs any day. That way, we wouldn’t have too many debts

2. Pay the full balance owing on your credit card on payment date. Some credit cards allow you to pay just 5% of the full balance owing. If you pay the minimum due, it would take you 20 months to pay off your credit card – if you were to stop buying and just pay it off. By then, you would have paid lots of money in interest

3. Do NOT buy a car on residual. What if you lose your job and you don’t have money to pay the residual?

4. Buy a car that you can easily afford to repay and put a deposit for it. Please read chapter 5 entitled; Is your car driving you destiny? to find out more about the smart way of buying a car

5. Always pay more into your home loan account than you need to so that you are always ahead. This will give you some breathing space if you were to lose your job. You would also be able to negotiate for a lower repayment while you are looking for a job

6. The most difficult thing for all of us is to downgrade our standard of living. When we lose a job, we have to interrogate our budgets and cut down all nice- to -haves

7. Find someone you trust to share your home with or rent an unused room or cottage in your home. Consider renting out your home and moving into a cheaper place while you are looking for a job but make sure you get a tenant with a clean credit record.

8. If all else fails, you are better selling your home yourself than waiting until it is repossessed. You are likely to lose out big time if you let the bank repossess your  home and you will also mess up your credit record

9. When you lose a job, your number 1 priority should be to pay off all your debts so that you don’t mess up your credit record. There is no guarantee that when you lose a job, you will find another one or when you will find another one. So you must focus on paying off all your debts to keep the creditors & stress away

10. Life cover – as far as humanly possible, pay for your life cover as none of us know when we will die. Also, if you cancel your life cover, you might find that you now have a disease that you were not aware of and when you try to take out life cover when you find a new job, this could cost you more

11. Always put away money monthly preferably in ETF shares. Start from as little as R300 monthly and increase this amount on a regular basis. This way, you would have some cash available to you whenever you need it. See the last chapter in the book From Debt to Riches for more on buying shares

This is by no means an all-encompassing list, but I hope it will go some way to ensuring that you don’t find yourself in deep water if you ever lose your job. By the way leaving by the above principles is good for all of us.

Want to share?

Job losses are becoming common occurrence in our country. If you have other tips to share, please pass them along. Sharing is caring

Did you know?

Some insurance companies will charge you higher premiums if you have a poor credit record.

From Debt to Riches

REMEMBER TO TUNE INTO CAPE PULPIT MONDAYS JUST AFTER 8PM NEWS TO LISTEN TO PHUMELELE AS SHE TALKS ABOUT ALL THINGS MONEY

To Book Phumelele for a talk / workshop on all things money, email phumelele@test1.sdds.co.za T&Cs apply

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Thank you and Warm regards

Phume