Pay off your short-term debt for a ‘guaranteed’ return on investment

If you are one of the many South Africans whose short-term debt ballooned over the festive season, paying it off will probably be one of the best investments you make this year, says Stephan Hartzenberg, head of product development at 10X Investments.

Alot of us get back to work after a festive break feeling a bit down that the holidays are over and concerned about the state of our finances. Post-holiday blues are worse still for those whose spending got a bit out of control. Spare a thought for those who are dreading the arrival of their credit card statement. If you are paying 15%, 16%, 17%, maybe even 18%, in interest on your credit card, or even higher interest on a personal loan, getting rid of that debt would represent a 15%, 16%, 17%, 18% (or higher) return that is guaranteed. Consider also making regular top-up payments towards your car or other debts if there is space in your budget, whilst ensuring you provide for saving for when you will need it most, at retirement. Paying off short-term debt and saving for retirement are two examples of financial levers that are within the individual’s control. Small, significant improvements in these areas will help you make large steps towards financial health and wealth. Another key game-changing lever in the hand of the individual is the fees paid on financial products. Particularly with long-term investing, the cost of fees compounds in the opposite way from investment growth. Just as the value of our investment will increase exponentially after a certain period of time in the market so will the hole left by fees. If you are paying more than 1% of the total value of your investment in fees every year you should think long and hard about the damage that this is doing to your long-term wealth. If you are not sure what fees you are paying or what the long-term effect of those fees is on your investments, 10X Investments will do a free assessment and comparison for you. Get a cost comparison.