Children's debt becoming your problem
? Turning less into more
The impact of debt-ridden South African consumers for many pensioners is that they have to use precious retirement capital to bail out over-indebted adult children.
Rather than dropping more life savings into a bottomless pit, parents could help their children more by showing them how to restructure their debt in a way that increases personal savings and sets them on a new, fresh path.
Blue Oak Systems has just launched their RESET application which shows the consumer what monthly savings can be achieved by structuring debt effectively, particularly expensive unsecured debt such as credit cards and store or retail cards.
Co-founder of Blue Oak Systems Theuns Hanekom says that the mistake people often make is that they take maximum consolidation loans to pay off as much debt as possible. The problem with this approach is that it does not necessarily deliver desired monthly savings which means the debtor soon needs to start borrowing again.
“Sooner or later they will hit the wall – they cannot access any more loans,” he says. “What RESET does is calculate the MINIMAL loan that will have the BIGGEST impact on monthly savings. This way, the person has extra cash every month which allows them to buy groceries cash instead of on a store card, purchase a much-needed vehicle or start paying off other debt.”
Hanekom says that, depending on circumstances, savings are sometimes minimal but recently one of RESET’S first clients saved R12 000 per month by taking a minimal loan of R48 000. Even a monthly savings of R2 500 per month can make a huge difference to a family. If you’re paying about R8 000 per month to rent a property, an additional R 2 500 per month will allow you to buy your own house for about R 1 million.
“The debt level in South Africa is frightening, but RESET allows you the opportunity to wipe the slate clean and literally start again.”
Convert employees' debt into savings
With the increasing indebtedness of South Africans and over 2 million garnishing orders in place, employers are being faced with increased absenteeism, low morale and unrealistic expectations come salary increase time.
Theuns Hanekom, co- founder of Blue Oak Systems, recently launched RESET. The web-based online application empowers employers to assist employees to – wherever possible - convert debt into improved personal monthly cash flow.
“The RESET approach is not about consolidating debt with a maximum loan – that is not always possible and often unrealistic and does not necessarily yield the greatest savings. RESET is however about establishing a debt structure which delivers the maximum monthly savings or improved cash flow for the employee,” says Hanekom.
He points out that putting extra money in an employees’ pocket can have a marked effect on morale – thus addressing turnover rates, absenteeism and overall employer – employee wellbeing. Morale has drastically been effected for the worse, as the deterioration in economic conditions have affected employees and employers. Employees are desperate for a salary increase at a time when many companies cannot afford increased costs – and this creates a negative working environment. RESET can often unlock that extra cash flow needed by the employee.
The RESET application is very simple and takes a few minutes to complete.
“Firstly, RESET is conducted in a secure online environment. It’s convenient and efficient. The employee captures his or her ID number and RESET collects the essential information on current unsecured debt from the Credit Bureau. RESET then calculates what consolidating loan amount the employee would require and which accounts, if settled, would yield the maximum monthly savings – the savings amount is provided to the employee within minutes. If the savings are deemed sufficient, then the employee moves to phase two which involves a specific report on how the savings can be realised,” says Hanekom.
They can then either approach their own bank with the debt re-structure plan or move to the next phase which involves Blue Oak Systems handling the transaction A-Z on their behalf.
Blue Oak Systems charge a nominal fee for each of the vital online phases but are happy to discount the fees if employers are willing to subsidise employee use of RESET as part of their Employee Wellness/Assistance Programmes.
“The indebtedness of South Africans has a significant effect on productivity and the motivation levels of employers,” Hanekom adds. “The problem is only going to increase as many consumers can no longer access additional loans. RESET cannot uncover savings in all instances, but in most cases it will show you how to reverse a negative monthly cash flow into savings up to R10 000 per month or more.”
Using your Bureau Report to find hidden wealth in your debt
Blue Oak Systems has just launched an online application called RESET which will help debt-ridden consumers to restructure their unsecured debt. The RESET principle centres around establishing the minimum consolidation loan which will yield the maximum cash savings.
With over 8 million South Africans over-indebted and debt consolidation solutions failing, it seems a little hollow to talk about encouraging a savings habit.
Theuns Hanekom, co-founder of Blue Oak Systems, believes that we cannot begin to talk about developing a savings culture in South Africa until we can show consumers how to unlock savings from debt. He feels that financial advisors are trained to operate on one side of the personal balance sheet only whereas the problem and opportunity often sits on the debt side.
“We have thousands of highly qualified financial planners in South Africa all selling retirement, investment or life products, which is right. But if they looked at the debt side of their clients’ personal balance sheets, you’d find that they could potentially improve their clients’ personal cash flow and either increase savings or as a minimum, reduce the need for clients to borrow more. I’d like to see financial advisors impacting on both sides of the personal balance sheet,” he says.
Traditionally, the thinking has been to consolidate debt through taking a maximum loan. Ironically, this doesn’t always result in achieving maximum monthly savings. The problem is that if you don’t enjoy a monthly cash flow improvement which makes a difference, sooner or later you’re going to be borrowing again until such time as you just cannot access any more loans. Hanekom says that with an average savings of R2 300 per month per consumer reviewed, everyone debt should be reviewed.
Another problem in debt management is that people are not comfortable talking about debt which means they don’t access the expertise required to successfully structure debt. Hanekom believes that with RESET, the first online debt consolidation calculator, anyone may review their debt in the privacy and environment of their own convenience.
Hanekom says that before looking at blanket consolidation and raising optimal loans, the first option must be to find maximum savings by taking the minimal loan. Using debt consolidation effectively, and earlier in the debt spiral, could eliminate the need to advance to debt mediation or debt review.
“But first you have to determine if there is wealth in your debt. All you have to do is look at both sides of you balance sheet.”