The SA Reserve Bank’s announcement to reduce the repo rate by 0.25 percent has offered South Africans some financial relief.
For instance, consumers with a home loan of R1 million will now pay roughly R166 less a month, or almost R40 000 less over the 20-year loan period.
While it may be tempting to spend the extra disposable income on a few luxuries, such as takeaway coffees or a dinner out, this money can rather be used to make a difference to your future financial health.
This cut is an ideal opportunity to re-evaluate financial goals and take control of your money. By following a focused plan that puts the money to good use each month, you can really help your future self live better.
Three top tips to take advantage of the repo rate drop:
1. Pay off your debt faster. Continue to pay off your debt as if the interest rate change has not taken place. Paying off a loan faster means that you’ll save on the amount spent on interest. Your future self will also thank you for those few less months of loan instalments, which can be used to invest in your future or for things you actually enjoy.
2. Tip: Pay off credit with higher interest rates first. Store and credit cards often have high interest rates when compared with other loans. Pay these off first to maximise your savings and where possible switch to more affordable options. Pay it forward to your future self. Use your bank’s app to set up a recurring monthly payment into a savings plan.
Once you’ve built up a sizeable nest egg, which will be earning interest each month, you can use this money to buy a new household appliance, to go away on a holiday or even kick start that side hustle you’ve been dreaming about.
Putting R166 into a savings plan each month for two years quickly grows to more than R4 000.
3. Study further. A recent poll conducted shows that 21 percent of South Africans name furthering their education as a 2019 savings goal.
Use the monthly saving towards studying further, which could earn you a promotion or the opportunity to apply for a new exciting job.
Francois Viviers is an executive of marketing and communications at Capitec.
BUSINESS REPORT