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What are your sort of thoughts around debt? Because we'd be getting into this conversation of, is all debt really that bad? And for many, debt is a constant source of stress and worry, but is it really always as negative as it's made out to be? Well, tonight we'll delve into the complexities of debt exploring whether it can ever be a force for good, and joining us to shed light on this topic is Taboholo,
Senior Program Manager at Old Mutual. Tumble, very good evening and welcome to Power Business. Thank you for giving me the seatbelt and thanks for having me. I guess in my introduction I asked, can debt really be a force for good? Because the common belief then is that debt is harmful and we've seen the stories many people getting into the cycle of debt. But is that always the case that debt can be sort of a harmful trap?
Not really, not always. And I suppose just to just a preset, I think it is Dr. Miles Monroe says, when pepper is not known, abuse is imminent. So if you don't know the purpose of a thing, for instance, in this case, that the chances are you will abuse it, right? And not all date is bad, right? You can use some sort of date for leverage purposes. You can use that to build wealth. You can
use that to generate extra income, et cetera, et cetera. So not all debt is really bad. But of course, the flip side of it is, yes, there is some element of debt that if not properly managed, if not properly used, can really cause stress.
Definitely. And I wanted to get into that. So now that we've sort of got that context that there's debt that can be used for good, talk to us in about the debt that can be used for good. What sort of debt should we be looking at if we feel that there is the need for us to get into the debt? What sort of debt is that? Just as a simple example, you might have an idea to start a business and you've done your numbers. You look at the potential of this business being
a successful business, but what you don't have is upfront capital. You don't have your own money. There is absolutely nothing wrong with going out and getting debt to finance the business provided that debt will tend into some form of profit. That's just one example. We often buy houses. There is absolutely nothing wrong with going to a lender, a bank or any other lender to say, look,
I've seen a property and for my own primary, then it could just be a primary residence. And you can use that also. And there are many other forms of that that you can use to tend into an asset or wealth creation. So those are just the two examples. But also, for instance, study loads. If I want to go back to school or my children and I cannot afford to pay their fees, there's absolutely nothing wrong with going to Atlanta and say, look,
may I get some money and pay for my school fees, that could be income generating in the fees. That is just examples of
The debt that can be used for. OK, looking in at that debt that can be used for good debt, when the bank gives you that money, it sort of assesses who you are and how much you can take on. What if in the situation I have got all the best intentions? I want to get this debt. Maybe let's look at a home loan. I want to get this home loan. But I'm not getting the money that I want. So the bank says, you know what?
You, we're going to give you, we'll give you the money, but you're going to have to pay a high cost to pay back the debt. Talk to us about those sort of scenarios. How should we navigate that? Let's start by simply understanding that a relationship of a lender and person borrowing money is, is that of trust, right? And I wish everybody was as trustworthy as they could be, right? So if I am a lender, for instance, I want to understand two things, right?
I want to understand your ability to pay me back. What's the propensity of you being able to repay the loan back? The second thing is your willingness to pay me back. So the assessment, for instance, in terms of your affordability is typically, if, for instance, your pay split employee would look at how much you get, what's sitting in your bank balance, et cetera, et cetera. And in that way, we have
a sense of how much can you actually afford to pay, right? That's the first thing. The second thing, particularly in South Africa, is your willingness to pay. And we recommend asking that if you took somebody's money and you repaid it diligently, the chances are if you take another person's money, you will do that. We use bureaus. We use credit bureaus. We use scores and we rate you in terms of your propensity to
to repay the amount. So to bring it back to whether or not it's entirely dependent on the level of entertainers that you put yourself in. And the ideal thing is, live within your means. Think on debt that you can't actually afford.
It's not a target. If, for instance, you go to a lender and they say, no, you qualify for $200,000, that does not mean you absolutely must take $200,000. Definitely. It depends on what you want to buy a car and the car is worth $60,000. Of course, you qualify for $200,000, but the car is worth $60,000. There is no reason. There's no need for you to go for the $200,000. You can't buy that car for $60,000. So leave within the means. That's the rule in terms of
of taking on debt. Don't take on more than you can compare. And speaking of living within your means now, Table, according to the latest Manistris Tracker survey, over half of South Africans are spending more than 40% of their tech home pay on debt repayments. What do you think this says about our approach to managing debt? It seems like this generally is our approach in managing our finance.
From setting up our budget to, remember, when we set up our budget, you look at what we want to achieve in terms of life, right, our goals, and how we're going to finance those goals. But if you set up goals that are unrealistic, I want to drive a German sedan, live in a $7 billion house, but in 10 rents.
That's kind of unrealistic. So in many an instance, we are driven last year and I know that I'll probably get my head chopped off by conspicuous consumption trying to please people that don't care much about us anyway. So we kind of overlap, extend ourselves and we sort of bridge those gaps losing all manner of debt and unfortunately that end up lending us in debt prep that we cannot get out of. So the whole act is
leave within a means, speak to your budget, set up your goals that you can and realistically achieve with the kind of money that you have. And if you can master at least that bet and the discipline of staying within your lane in terms of the landing piece, I want to buy a house. I don't need a particular mention that will be over and above what I can afford.
speak to us, speak within us, leave the joins alone, leave the hetero-res alone. I don't know what the hetero-res are doing to live in that big house. Can I just speak to what the holos can afford? No, I wonder what the holos are doing to, you know, keep up with the joinsers. But on the other hand then, you know, talk to us about what types of debt should people be wary of and how can they recognize them when they might be falling into a debt trap?
If they know there's certain products, and I know that there's, again, there are people that are managing and owning those products, but there's certain products, to be honest, but if it were according to me, you'd avoid things like payday debt. For instance, that keeps you in the debt cycle, right? You actually ask people from your future. Now we even designed the products that you can actually access your payroll before even
you get paid. That's a form of debt. Those are the debts that you need to avoid. So any debt that does not actually put you a step up, whether it's generating income, whether it's creating wealth, you need to, as much as you possibly can avoid that. I've seen, unfortunately, most recently where people use stock cards to buy alcohol. Sure. That, to me, it's an indication of things going horribly or
It's nothing that's going to come out of bed except you're going to find yourself deeper and deeper in your own, right? So there are certain categories that you need. Yes, I'm not saying don't use unsecured loans. Unfortunately, you didn't plan on having a double puncher after hitting a portal and you find yourself in a bit of a mess. You don't have cash at that point. There is nothing wrong that says
taste that then take your loan, feed whatever you need to feed, and speak to what you can afford, repay as quickly as possible. Unfortunately, some of these products come at a very high price. Those unsecured loans, those payday loans, those advances come at a very high price. And those are typically the loan products or the lending products that you need to avoid. I'm not saying everything is better. I don't want you to get me wrong.
But manage it as much as you possibly can. And if you get yourself in a situation where you're taking on more and more debt, please check yourself. Use other alternatives. That review is there.
dead consolidation, they try to get yourselves out of that death cycle as quickly as possible. Yeah, and as you're speaking of, you know, those are unsecured, sort of loans that sort of sparked in my mind, you know, credit cards. And I thought you would also sort of target them as well, because we know credit cards are, they've got a bit of a bad rep. They are the totally people being available. It's in your wallet. You can easily access it.
anything in words, because now you can even withdraw case doesn't, doesn't respond to something. You can actually withdraw case out of the, out of the credit card. Exactly. That is another one that if, if purpose is not known, then abuse of the credit card is imminent, right? It's, it's some of these things that you need to avoid. Yes, there's an emergency that you need to fix. Um, yes, use your credit card. Um, and some credit card, they have a 55 day interest, interest free,
if you are able to paid off and get out of it as quickly as possible. But don't abuse it. The fact that it's in your wallet does not mean it's your money. When they say credit available, it doesn't mean it is your money. It's still the basement, it is still alone. It might look fancy, it might look like black and all platinum, believe you me, the chances are that the allure of it going wrong
Yeah, definitely. On that note, though, it is 19 minutes past seven o'clock here on Power Business. I'm in conversation with the Taboholo senior program manager at Old Mutual and we are sort of unpacking the question, is debt really bad or really all that bad?
A dial is in on 086198700 or WhatsApp as you've used in comments on 083303 7093. You can also reach us on X at a PowerFM 987 using the hashtag, the show hashtag Power Business. Notable, I'm curious to know then, why is it so important for people to really fully grasp then the long-term impact of bad debt? Because how can it affect one's financial health down the line?
Well, number one, some studies have found a direct link between the bad management of debt and mental health. And in some instances, generally you help, right? Because you start getting worried. You start trying to fix things that unfortunately are not feasible and they start to help affecting your health. So not being able to manage your finances in general, not just debt in general, right, has bad repercussions.
One of the major causes of breakages in terms of relationships, marriages, et cetera, is how we manage our finances. That is one of them. In some instances, we even cheat because we don't tell our better house. We don't tell our spouses. We don't tell our partners that we are deeply in debt. As a result, we can't perform certain functions in our house. Some of us don't even go to it anymore. We use different entrances when we get
to work at a certain times because now we have the lack pressures of this world waiting for us, looking for their money. So not managing your finances generally, yet in particular, can result in unfavourly impact unfortunately on your life. The best way, again, is to be honest. To be honest, if you are already, most of us have been there, right, where you are
in a bad rep, you are in a bad situation, be honest. The first thing that I would advise anybody is you are entitled to a credit report or get that credit report. Face it and say, how deep is this hole? Like, how much am I owning? Who am I owning? What arrangements can I make? And start making those phone calls, call them before they call you and say yes, no simple, I owe you, right? Here is what I can afford and be honest about it. And if
No, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no,
cut down on those, and this is this thing that we think we need to want them. But let us be clear on what is our want, what is our things that we can delay, what are the things that we need to plan for, what are the things that we can put off completely, and you don't need that extra pair of sneakers. If you absolutely have to buy them, then buy them. But get out of those expenses that are unfortunately
are bad in you. Secondly, if you are able to generate extra income somehow, it's a side hustle so that you can use that money to get out of that, not splish, right? Get out of that. That is another way of avoiding that. But as quickly as you possibly can, try to break that cycle, try to get out of cycle by managing your finances generally in a proper manner.
All right, we've got some callers on the line, Andrew from Pretoria. Andrew, very good evening. Welcome to Power Business. Shoot your question then at Tabo. Thank you very much again for the opportunity and thanks, Tabo. As Tabo is speaking, and he's talking about mental health and finances and how people can end up getting dead because of mental health. People have taken their two pots.
And the second one party state and the other one is finished now because they did not deal with their mental issues before they deal with the finances. So they thought that, you know, people think that finances will solve some of the mental things that they are having. And we've got a serious challenge of now, people who are gambling also because they want to solve some of the mental challenges that they are having.
And that is where the problem is. And thank you very much, Talbot, for that great insight. Thank you. All right. Thank you so much, Andrew. Yeah, a very important one. The two-part coming up there from Andrew. What are your reflections, Talbot?
Mmm, tricky head. I've got a very nice comment when I was coming here about two points. Yeah, that's a very tricky one, these two parts. You don't need it, just don't take it, right? And everyone's bought on in terms of trying to fix mental health issues using short-term needs instead of confronting what actually is bad in you.
what actually is, but what actually is the cost and the root of the problem. And we think we can shop second by putting more and more bandages on it, more and more money on it. And you think, you know, it doesn't work. I don't know what the steps look like. It would be interesting just to find out those that we threw and how many of those actually use the finances constructively. I've seen there were two parties.
There were two processes. I wonder how many of us actually use that many constructively. And again, if you don't need it, don't do it. It doesn't mean it's a target. When somebody says, hey, you have 200 cases in your port, it does not necessarily mean go take that. You are actually eating into your own future. The whole idea is preserved as you possibly can, right? And stay within your means.
believe within your means, that's the message. And I think the greater concern also around the two-part thing is the fact that for a lot of South Africans, this is the only form of savings that they have. So to be sort of taking from your future and not having any sort of buffer, if something were to happen, is the real concern there? No, absolutely. And yet in an understanding that South Africans, we massively under financial pressure
to the point that some would resign just to access those funds so that we can patch those holes that we've dug ourselves into at some point. I get it. I'm not naive to the fact that yes, the could be people that use that for good, right? All I'm saying is cautioning, right, that I hope that we are truly using it for good. If not, just leave it there. It's still your money. It's still your money. It's not going anywhere. It's still your money. So avoid using it.
including debt, right? You have access to it. It doesn't mean you absolutely have to use it. You can leave it alone and say, in case I need it and I absolutely need it, then then access it and use it. It's just a matter of prudent financial money, personal finance management. And before we get into sort of unpacking the practical strategies that people can use, I want to know what's your view on a loan to pay a loan?
Again, at the risk of digging yourself into a peer hole, if, for instance, you're talking about consolidating all the loans that you have so that you have just one loan that it might be a strategy. But again, make sure that it remains within what you can afford. So if you are consolidating because you're getting different price, then you are where you are, unfortunately. Yes, you can. But if you were to steal from Peter just to pay a poll and you remain within that cycle,
Unfortunately, that's not prudent. If you're taking, in some instances, a higher cost debt to repay something simply because you're seeing a little bit of pressure, rather deal with what you have. Make arrangement to repay what you already in a mess with instead of just going up. So it's not ideal to do it.
But if you absolutely end up further away, you have to just consolidate so that you are just faced with one dead. That could be the one strategy to deal with that. But again, be careful, don't pick the whole deeper. All right, let's take one more call, Tabo. Bongani from Fundabel Park wants to weigh in this evening. Bongani, very good evening, and welcome to the show. Give us a, or tell Tabo what's on your mind.
Um, the two participants, it's a really a scam, and I would say why. It's a scam. Yeah. Yeah. Yeah. Yeah. And why I'm saying for that, it protects the government. How to explain those people claiming it correctly, but being paid 18.5. I mean, a person that claims those people, someone who's under pressure, someone that we can't afford, someone who is under arrest,
You know, you're hoping that this has to alleviate, you know, some of your struggles, but you feel like, I mean, you're left alone. I mean, how much is coming when you're switching out of the process? All right. That's the workers, man. It's a shame. It's a shame. Because remember, at workers, we respect with this, we wanted at least 100K to say, at least because we are, we are, many of us are the least legal, you know,
We can't take our kids anywhere into what it is. If we have 100k, you know, okay, I can be able to pay the, okay, maybe say the first six months of the rest for my kids. But I mean, with 18.5, come on. Bongani, are you a beneficiary? Yes, I am a beneficiary. Okay. All right. We're going to leave the same, man.
Okay. All right. We're going to leave it there. We're running out of time. You can hold on the line to listen to Tabo's response. Tabo, Bongani, they're weighing in on the two-part, you know, he's not in favor of it. Yeah. Yeah. I can sense the Bongani frustration. Bong, I'm not sure if we do this again, but I understand the frustration. And particularly if the issue of marginal taxation was not well understood.
Because this is absolutely important in terms of the amount of taxation that went into that. Hence the issue of preservation to say, to avoid preservation, just preserve the fund. I understand. I truly and honestly understand that most of the people are finding themselves under pressure. But honestly, if we just step back, we just step back and say, do I absolutely need to withdraw this fund right now? Do I absolutely need to get
that dedicate now, is it going to fix what I need? If, for instance, your hole was a 40,000 hole, will that 18,000 fix the hole? Shouldn't we just focus on, here's a 40,000 hole, let me rather go make arrangements. Let me see if I can't get a side hustle to increase my ending potential. Let me find other strategies rather than subjecting yourself to higher taxation and withdrawing from your future.
I couldn't honestly understand the emotion, but I'm just not sure if it was a scam, but I understand the sentiment of what Obama is saying. And I hope if we get most Americans at least to speak to preservation as much as we possibly can, yes, if you absolutely need to
to withdraw by all means. It's your money, right? But if you can't avoid it by all means, please do avoid it. Just try to preserve those funds. Yeah. And I guess what I've learned really from these tough economic times is that you actually can tighten your belt a lot further than you think. No, no, not true. No, absolutely. And it's funny how once you get into that, then even your behavior is changing. Exactly. And suddenly you realize that actually
A very expensive bottle of whiskey, I can do with a little less expensive bottle of whiskey. And you can't use it with your palate, it changes something like that. And there are certain things that we can absolutely start avoiding. Instead of saying some genes, you might just decide to start working, so that you save that transcendence. So there are ways and means that we cannot adopt as sort of a kind, right? To just manage our finances a little bit better.
We don't have to eat out every night. We don't have to buy that extra pair of knickers. Please, stick to the budgeting. Your budgeting practice helps you stay in your lane. That is the only way for our skills that we can deal with some of the issues. Fantastic. On that positive note, we'll leave it there, Tabo. Really appreciate your time this evening.
It's an absolute pleasure. I bid you for all and I hope everybody is that budgeting. Yes, the key where they're budgeting. All right, that was a Taboholo senior program manager at Old Mutual talking to us about is debt really all that bad. You've been listening to a Power 98.7 podcast. For more podcasts visit Power 987.co.za or subscribe wherever you get your podcasts.