Previously, we talked about joint finances as well as budgeting and why they are so important. In our current economic situation, budgeting has become even more important. It might seem that you are in control of your finances but if you do not actually sit and calculate your monthly expenditure and make sure you save for the future, you could get a very unpleasant surprise.

The most important piece of advice I can give is this: try to minimise your debt. Yes, it is easier said than done, especially when it comes to purchasing vehicles, houses and other high priced assets. However, the extra monthly cash flow when you do not have an instalment or premium to pay will go a long way in the long run. Additionally, having debt means you pay interest. I advise you to save for a few months or longer, and then buy the item you want to purchase with cash.

A bond repayment should be your biggest monthly expense. During the standard 20 year repayment term, you pay almost double the loan amount in interest. You can save around 20% interest on your mortgage loan by just paying 10% extra per month on your capital portion and your repayment term decreases by about 40 months: that’s over 3 years shorter.

Let’s take a practical example:

• If your mortgage loan is N$ 1,000,000 and your interest rate is 7%, your monthly instalment over 20 year (240 months) will be N$ 7,753 and your total interest repayable over the 20year period will be N$ 860,717.
• If you pay an additional N$ 750 per month on your bond, your term reduces to 200 months and the total interest repayable will be N$ 693,571.
• So in total, you would save about N$ 160,000 and reduce your repayment term by 40 months.

Leave a comment and we will send you a basic monthly budget plan you can use for your convenience.  Use it, track your spending and own your monthly budget.