Smart Borrower's Guide

1. Learn to budget and save

Plan your finances each month according to your spending. A good plan is like a financial map of your spending. For example, classify all your expenses under categories such as living expenses, mandatory expenses, etc.. This will help you gauge where your money is going and allow you to better manage your finances. Get in the habit of classifying your various expenses so you know how much cash you have in your bank account each month. Buy a small notebook and keep track of everything you purchase with receipts. Think of your future and save. Save what you can, even if it’s a small amount. Saving anything is better than saving nothing at all. If you don’t know where to start, talk to your bank. They can start you on a plan that could secure your future.

2. Pay bills on time and in full

Remember that financial tools such as a credit card, personal loan, car loan, mortgage loan, etc. are all privileges and need to be treated as such. Never default on your monthly payments, as your credit ratings may be affected. Make sure you pay the full amount each month to avoid future problems with your lenders and give you peace of mind.

3. Live within your means

It’s easy to get carried away with your monthly expenditure when banks provide you with an endless array of services and products such as credit cards and loans. Live within your financial boundaries and be realistic. Remember your short-term goals, medium-term goals and long-term goals. These should play an important role in your decision when deciding whether you need to upgrade from a 30” LCD to a 50” LCD. If you do borrow money from your credit card or loan, set a plan to pay it back in full by the end of the month.

4. Never borrow money to pay a water, gas or electricity bill

These bills should be classified as mandatory expenses and you should never default on them or have to borrow money to clear them. Expenses such as these should be stored mentally as needs and you should never sacrifice these mandatory expenses to indulge in your wants. Remember to think rationally with your finances and budget according to priority. If you’re dead set on indulging in a want, sacrifice from another expense but never borrow money to pay for your utilities.

5. Accept credit limit increases cautiously

Don’t accept a credit increase if you’re barely able to manage your previous limit. Once again, a credit limit is a privilege and should not be treated hastily. You should only consider an increase when you’ve properly budgeted your income and feel comfortable with your current load of expenses or when you realise a fixed increase in monthly income.