Money Matters

Money Talks

By Nov 1, 2016 Nov 8th, 2016 No Comments

When you first start managing your own money, it can be daunting, especially given how much jargon is involved. Let’s face it, it’s difficult to make good decisions for yourself when you haven’t a clue what’s going on. This handy guide should help simplify things a bit:

Anything you own that could potentially be turned into money for you is called an ASSET. This includes “fixed assets” like vehicles and equipment, as well as “current assets” like stocks and your (positive) bank balance.

Credit providers like banks or retail stores offer you CREDIT, which means you can borrow from them to buy what you want, up to a certain limit, using either a credit card or a store account. You are then obligated to pay them back, with interest, by at least a minimum payment per month.

Credit rating/score
Your CREDIT RATING or SCORE shows how well you’re managing your money. It reflects your history of borrowing money and paying bills, and whether you pay your accounts on time or not. You can (and really should) check your own credit rating once a year for free via TransUnion or Experian.

DEBT is money that you owe to someone, either a formal credit provider or a friend or family member.

INTEREST can be a positive or negative thing:

The positive: If you’ve invested money, it can earn interest for you over time, which means that when you take that money out, you should have more than you started with.

The negative: On the other hand, if you’ve borrowed money, while you’re paying it back, the credit provider will be charging you interest on the outstanding amount. It’s therefore worth paying it back quickly, or at least paying more than the minimum amount each month if you possibly can.

A LIABILITY is anything you are obligated to pay money back on, like a student loan or other debt.

Prime lending rate
The PRIME LENDING RATE changes periodically as it’s based on the average rate of interest charged by major banks in South Africa. Although it’s currently 10,50%, credit providers may not give you this rate. Your personal interest rate will be based on your relationship with the credit provider and your own credit rating.

Knowing where you stand financially is an important aspect of managing your money. Start getting to know the jargon now!

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