This fourth episode of the Santam Insure your Future Money Bootcamp is all about using credit responsibly. It provides insights into budgeting, borrowing, and understanding the fine line between good and bad debt.

I’m again joined by Mapalo Makhu as we offer a comprehensive guide to understanding and managing debt.

The episode kicks off with a discussion about the pitfalls of consumer debt. We share real-life stories, including that of Thato, a mentee who found herself spiralling into debt through small, seemingly harmless loans.

This narrative is all too familiar for many, and we explain how easy it is to fall into the trap of credit cards and personal loans, often without realising the long-term implications.

One of the key takeaways from this episode is the importance of understanding the total cost of debt. We break down the maths behind short-term loans, revealing how high interest rates can make a seemingly small loan incredibly expensive.

For instance, borrowing R10 000 over three months at 5% interest per month can end up costing over R12 500. We stress the importance of reading loan contracts carefully and comparing different borrowing options to find the most cost-effective solution.

The conversation also touches on the emotional aspects of debt. Mapalo shares a story about a woman who, influenced by social pressures, ended up with a luxury car she couldn’t afford, leading to long-term financial strain.

This story serves as a stark reminder that our financial decisions are often influenced by emotions and societal expectations, making it crucial to stay grounded and make decisions based on our actual needs and financial capabilities.

Another highlight of the episode is the discussion on building a credit score responsibly. We debunk the myth that you need to max out your credit cards in order to build a good credit score. Rather use credit sparingly and pay off balances in full each month.

There are other factors which can also positively impact your credit score, such as paying insurance premiums and your cellphone contract on time.

Car finance is another major topic covered in this episode. We explain the concept of balloon payments and how they can lead to long-term debt if not managed properly. We caution against falling for the allure of expensive cars and advocate for choosing vehicles that are within your financial means.

The episode offers practical advice on negotiating with car dealerships and understanding the true cost of car finance, including hidden fees and interest rates.

In conclusion, this episode offers practical tips and real-life examples that can help listeners make informed financial decisions. Whether you’re struggling with credit card debt, considering a loan, or looking to build your credit score, this episode has something valuable for everyone.

To help you understand your full credit picture, you can use this credit agreement spreadsheet.