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South Africa has been downgraded to Junk Status: How does this affect you and what financial action should you be taking?

Feeling like your bank account has hit junk status? Here are some insights into what this means to you, the individual and what you are able to do to avoid financial strain.

The recent announcements by major rating’s agencies downgrading South Africa’s Debt to Junk status has left many South Africans reeling.

Firstly, what does this mean for our country?

In the immediate term our currency and financial markets can expect some volatility, with investors being more cautious in times of economic uncertainty.

In the medium to long term, companies and individuals will come under increasing pressure. Major companies such as General Motors may decide to relocate their operations, removing money and jobs from South Africa. The impact of the downgrade, although not immediately visible, will have effects on the disposable incomes of ordinary South Africans.

If you have debt, be wary! The cost of lending is expected to rise, so expect your credit cards, car payments and bond repayments to increase.

What defence can you employ against this tidal wave of financial insecurity? The answer is quite simple, SAVE!

Have you considered asking your boss to explore the option of restructuring your salary, perhaps helping you save paying excessive PAYE? Remember that great credit card you keep using to buy drinks at your local hangout? Cut it up and throw it away! Cancel it!

Have you ever considered asking your bank for the amortisation schedule of your home bond account? Do it now! Pour every spare cent you can scrounge into your bond account, try and eliminate the capital balance as soon as possible! Did you know that paying just an additional 25% of your monthly bond repayments into your bond account, will reduce the debt term to 7 years for a 20-year bond!

Thinking of getting that shiny new car, the one with the Bluetooth stereo and leather seats? Think really carefully! Car repossessions are at an all -time high, rising interest rates inevitably lead to higher repayments.

There is a bright side and the picture is not all doom and gloom. In chaotic times fantastic opportunities present themselves for the savvy investor. Be on the lookout for potential bargains, and take advantage of other people’s financial misfortunes. As Warren Buffet says, “Be Greedy when others are fearful, and fearful when others are Greedy”.

If you need some advice on how we can potentially save (and hopefully make) you some money, please give us a call, the first hour consultation is on us.

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