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The rich are in trouble

 | mymoney | debt management The rich are in trouble                                                         Page 1 of 6

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 Last Updated: 07:00am 26 Nov 2008

 SEARCH v                          The rich are in trouble
                                   Wed, 26 Nov 2008 06:59
  ... the website
                                   The rich are the most indebted and banks are
  for...                           reporting a 50 percent increase in bad debt as South
                                   Africans now owe R1139-billion and R8.20 of every
                                   R10 a South African earns goes to pay off debt.
                                   The latest figures from the Bureau of Market
 Ctn | Dbn | Jhb | Other           Research (BMR) at Unisa shows that more can't pay
                                   and are sliding down a steep slope into financial
                                   despair. Liza van Wyk of executive management
           16° 31°     » More
                                   skills training group, AstroTech says, "we are seeing
                                   enrolments in our financial courses rise and more
                                   executives asking not just how their companies can
 INDICATORS                        cope, but how they can manage their way out of
                                   serious debt."                                            Related Articles
 $ = R 9.97
                                                                                             » Does 'good' debt exist?
 £ = R 15.31                       The Unisa research shows that the income group            » Free yourself from debt
 € = R 12.92                       with the biggest debt burden earns between
                                                                                             » One easy step out of debt
 Oil = $ 49.23                     R500 000 and R750 000 a year. Their debt
                                   represents more than 135 percent of their disposable      » Borrow money to get out of debt?
 Gold = $ 817.8
                                   income and they use 34 percent of their disposable
 Last update:
                                   income to pay back debt.
 26 Nov 2008 16:56:03

                                   Their woes have seen the property market and car             Latest News      Talked About     Edito
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                                   than 200 car-dealerships have closed, according to           »   Tiger expects growth
      Casino Online – get          McCarthy. Ford will start lay-offs soon.                     »   The rich are in trouble
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                                   Nonetheless, major banks like Investec have said             »   Credit card fraud jumps
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                                   2009 although economic conditions in South Africa            »   Take the plunge?
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      Life Insurance
                                   "Our Finance for Non-Financial Managers course is
                                   consistently jam-packed, we're seeing high interest
      Flights Online
                                   in our early February course on Corporate Budgeting
      Compare quotes.              as well as our Risk Management and Strategic
      Insure.                      Management courses," Van Wyk said. "Our skills
      Flight Centre Specials       trainers are reporting the most attentive delegates
                                   yet in financial courses, with many afterward asking
      Car Rental Online            for personal guidance — and these are the cream of South African business, government and p

      Online Dating                Wayne Ford, AstroTech's top financial management trainer and a highly-respected managemen
                                   giving his overview of the present situation said a low Rand against most major currencies wou
      Audio, TV, GPS & PS3
      etc                          necessarily help the economy. "Not every company will be able to compete in the export mark
                                   that cannot compete and survive unless domestic consumption expands is not going to be able
                                   the much more aggressive export market."

                                   Ford said the biggest challenge facing South Africans and global financial markets was pervasiv
 GET IN TOUCH »                    "We keep interest rates high partly to reduce credit spending and thus domestic inflation and p
                                   the exchange rate and reduce imported inflation from things like oil and foodstuffs. High inflati
                                   to the poor, who have no spare disposable income, no savings and minimal flexibility to increa                                                           11/26/2008 | mymoney | debt management The rich are in trouble                                                 Page 2 of 6

                             — other than to strike for higher wages. Fighting
                             inflation is one of the best ways to help the poor.

                             "And when banks won't lend to them any further,
                             those in financial trouble go to loan sharks and incur
                             extortionate interest charges. 'Incentivising'
                             everyone to cut debt is critical.
 Got something to say?
 Click here to send a mail   "The American plan to cut rates in order to fuel
 to Personal Finance and     credit spending was fine in the very short term, but
 Property editor Kabous      it was poorly judged credit spending that caused
 le Roux.                    their problem in the first place. You don't have to be
                             a genius to realise that the credit boost they are
                             creating now (which is being funded by increasing
                             the federal debt) will lead people into further debt,
                             which will have to be paid for in the future by
                             families who can't afford their existing levels of debt
                             now. This is like treating gangrene with morphine —
                             although it has stopped hurting it is still there, it is
                             getting worse and if left untreated for much longer it
                             will certainly kill you."

                             Challenges for labour and land redistribution

                             Ford said that, "Creating jobs is very important, but those jobs must be sustainable. If we crea
                             allowing customers to buy on credit then those jobs will disappear as soon as the next level of
                             reached. Also, if jobs are created by allowing families to get into debt, then the cost of prosper
                             exceed the prosperity itself and the whole cycle will continue to spiral negatively. These negati
                             entire economies — the USA is close to the edge right now and many developing nations have
                             slipped over the edge.

                             "Allowing the exchange rate to drop helps exports but has the parallel (and much faster) effect
                             imported oil prices." Ford said that, "We need to increase exports by reducing manufacturing c
                             improving productivity vs. wages. It would help if we could break our dependence on imported
                             we could then happily devalue the currency.

                             This requires a massive focus on green energy sources and better support for efficient corpora
                             opposed to land redistribution to subsistence farmers who can barely feed their own families, f
                             towns. The example of Zimbabwe is very relevant here. "A growing economy needs citizens to
                             banks cash-flush, which eases the cost of borrowing and makes capital available more cheaply

                             A short term solution for families in trouble

                             The short term solution for individual families is the following:

                                    Stop spending.

                                    Use all available cash to pay off debt.

                                    Stop spending.

                                    Use less fuel — switch to public transport where practical.

                                    Stop spending.

                                    Grow some of your own food in the back yard.

                                    Stop spending.

                                    Trade in your car for the cheapest car you can find.

                                    Stop spending.

                                    Get solar heating installed as soon as you can afford it and meanwhile save power with

                                    Stop spending.                                                   11/26/2008 | mymoney | debt management The rich are in trouble                                            Page 3 of 6

                                Get a second job.

                                Stop spending.

                         USER COMMENTS »

                         the rich?
                         how can a person in debt be called rich,i drive a bashed up old golf,but i dont owe
                         nobody anything,that makes me rich.I dont need to stress about earning more and
                         having sleepless nights about it.I dont compete with the Joneses.That makes me
                         rich.. frikkie botes

                         Nice feeling hey Frikkie
                         . ddc

                         well done frikkie. you must be very proud.. G

                         proud you can be indeed, Frikkie.
                         only stupid people borrow money and pay interest.
                         feels so good to have no debts.(where every Rand actually costs you 1.20)long live
                         that good old fashioned calvinistic thinking :-). edward

                         Are you kidding me.
                         This was obviously written by a person who thinks that going back to the 3rd world
                         is the best way to make/save money. - "Grow you own food in the back garden?"
                         And it is said, use public transport and then the righter says trade in your car for
                         the "Cheapest" one you can find. Ever heard of penny wise pound foolish? If you
                         get the cheapest car you can find it will break down and cost you more than a good
                         maintained car. (Oh and if you dont maintain the car, wonder what the resell value
                         is?) Growing food in your back yard, you need a Back yard. And then, the cost of
                         upkeep is more then it will be to buy food. Understand me correctly, but at a fresh
                         fruit market instead of Woolies. But Grow your own food. COME ON! So before we
                         are pushed back into the darkness if the 16th centaury, use your money correctly.
                         Plan forward and make informed decisions. And for Pete sake, don’t do things you
                         don’t know how - Like gown your own food. Oh and obviously, stop spending, like
                         creating a food garden is not spending. . CJ

                         Great idea
                         I do have a garden and I think growing some of your own food is a great idea.

                         . Dr Greenthumb

                         High interest rates
                         My biggest question is, if the government is trying to stop new debt by increasing
                         interest rates to discourage new loans, why not just apply higher interest rates to
                         new loans and not penalize old loans? I have a 5-year-old bond that I could
                         manage to pay without a problem, but after the many interest rate hikes I now
                         have to borrow from my access bond because of the R2500.00 / month more it
                         cost me on bond repayments. So, from been part of the solution I have become
                         part of the problem, and no fault of mine. It just does not make sense why people
                         who have been paying off their house and car for many years now have to suffer
                         because of the need to curb new debt. Those who are financially responsible should
                         be rewarded and those who are financially reckless should be penalized.. George

                         do not spend
                         A good mind only needs half a word to understand a concept ; 'CJ' obviously has
                         no such facility & cannot even spell or construct a decent sentence ! . GB

                         What about budgeting
                         I am surprised that there was no mention of budgeting in the short term solutions.

                         How will you know if you are in trouble if you don't have a budget?                                              11/26/2008 | mymoney | debt management The rich are in trouble                                                 Page 4 of 6

                         Madia Thomas,

                         Stop spending! Simple.
                         I love how this article repeats the words 'Stop spending'. It really is as simple as
                         that.. Richy Rich

                         Only one way
                         There is only one way to get out of debt problems - just don't make any debts!
                         Easy. And STOP SPENDING! ;-D. Brakkie

                         has the writer of the article priced solar heating lately? ya well no fine.. cheryl

                         Yeah Grow Your Own!
                         #. Ian Finch

                         The rich are in trouble
                         I am not happy with the advise that your writer is giving and I find it very much
                         the OLD stuff!!

                         By downgrading your car is the worst cash flow option!! By trading in your origional
                         car for a cheeper car is throwing away R 10 000 to R20 000 immediately!! Then
                         you have to put a deposit down and start paying off on a new lease...AND then
                         your fuel saving is R1 or so per klm!! Please this does not work and can only work
                         if you are doing long term planning!

                         Also, by installing a solar heating system will cost R30 000 to R 60 000 up front
                         and you only see your saving after 3 to 4 years!!

                         Both options are cash out right now..and will put us all very much deeper into
                         debt...and will not help anyone right now!!

                         . David Hartley

                         I dont think CJ got the message.. pala

                         how stupid !
                         oh what a joke of an article.. cant belief that allow this rubbish here. We must
                         catch public transport and grow veg in our back yard lololol. The wealthy are
                         wealthy because we take advantage of opportunity.. if that means we need to
                         borrow in order to turn profit we do so..and yes i drive the bmws and have nice
                         properties and things are tighter that usual.. but when this economic mess blows
                         over.. the "poor dads" of the world will still be debt free and have nothing !! what a
                         joke. Paul S

                         David is misguided
                         David,downgrading your car is an EXCELLENT option, probably the best thing you
                         can do! What are you on about 'put down a deposit for a new lease'? The idea is to
                         get rid of debt. Sell your car for as much as you can and buy a second hand one
                         CASH! (If you could only get R30 000 for your car then you only buy one worth
                         R30 000 and not a cent more) You obviously don't get it and is addicted to
                         spending like the 'rich' this article refers to.

                         Solar heating DOES save money. If you have the money, do it! Three/four years
                         and you have all your cash back!

                         David Hartley, ru in trouble? I wouldn't be surprised.. Matt Duval

                         Paul is spewing rubbish
                         To Paul, what the hell is wrong with using public transport? It will save tons of
                         money not to mention spare the environment! Even if you don't have money
                         trouble it's a good idea.

                         The wealthy are in trouble because they borrow (not only to turn a profit, that
                         wouldn't have been a problem) to consume and keep up with the Jones's.

                         You might be doing OK, but the rich are losing their BMW's and nice properties at                                                   11/26/2008 | mymoney | debt management The rich are in trouble                                              Page 5 of 6

                         an unprecedented rate. You're NOT rich if you struggle to make ends meet,
                         whether you own a Beemer or not.

                         Paul, you're spewing rubbish.
                         . Karien Meintjies

                         Well Off
                         How do you judge when you are well off? Its all relative.

                         I was one of those in the 500000 per year bracket until 4 months ago. ( I was only
                         in it from Jan 2008) before that a good+-360000 supporting a wife and 2 kids, I
                         made a decision to jump off the band wagon, why ? life is too short to have to
                         worry about who gets paid when,,what car can I buy, lets eat out tonight etc etc I
                         wanted a stress free life with enough to eat ,a car to get me from A toB and a roof
                         over my head.

                         I was fortuneate I had bought over the years a couple of properties which I sold
                         off ,sold my exec car and 4x4, bought a 1.3 runabout , Bought a caravan and had
                         a Custom tent made . We bought a small house with Granny flat and now My
                         eldest son and his wife live in the main house ,pay me rent and I have the granny
                         flat to go to when I need a night in Town, or am not well.

                         I now live beside a river in the East Cape, with a magnificent life style and
                         everything is paid for.

                         No more worries, Life is great

                         To recap:Get rid of debt, choose a simple life style,don’t keep up with the Jones
                         and yes grow your own veggies its fun
                         . PB

                         eish is rich
                         how about diverting politicians' salaries into a national cabbage patch and making
                         their teams of bodyguards do the weeding? Then give the 33 Mercs in their
                         calavcades to the poor and replacing them with skateboards, and finally set the
                         politicians themselves to productive work by making them polish the insides of
                         sewers. They always have been full of s##t anyway. Viva making politicians help
                         us out of debt viva!. the dude

                         I love spending and saving......
                         Basically im 29 years old and i have 2 jobs : Travel agent by day during the week
                         and house DJ on the weekends....NICE salary of R10000 afta TAX..Im a bachelor
                         living in a nice area in cape town,,paying R4000 rent plus another R4000 for
                         essentials like food and petrol and still saving R2000 a month that goes in the
                         bank...I have woman every weekend keeping me company BUT i never commit
                         cause you see WOMAN are expensive things,,,,if you know what i mean!!!!! ;)
                         I drive a R30 000 tazz which i bought cash ,,,yes cash!!!! i suffered for a while with
                         public transport but now the car is mine...
                         SO......does that make me rich???? SCrew what any1 else thinks...i dont give a
                         faack...i spend money on clothes and restaurants,maintain my self and my car and
                         my flat and thats dat....
                         so i spend and save and i dont go overboard with having the biggest #### in the
                         Problem with rich ppl is they never know went to stop : 1 business is not
                         enough,,they want 20.....1 car is not enough they want 1 for their cats and
                the writer can go blow coke for all i care.....having money and how you
                         deal with it is a mind set.....stop spending money on woman and makes
                         me sick when i see families of like 5 to 10 kids then they complain and moan.....

                         Anyways....summer is here,,,im gonna go to the beach...see ya lata.... Scott Scot

                         solar heating
                         forget the advice about solar heating, its only worth it over the very long haul +5
                         years payback, if you're in debt that money will be better spent reducing your
                         debt. You can reduce your thermostat temp and just take showers to save
                         electricity in the mean time.. xf

                         I agree
                         I paid off all my credit cards using my year-end bonus, and while I might not have
                         a great xmas, I am saving +-1000 a month for the next 2 years that the bank isn't
                         making from me in interest payments anymore. freddie                                                11/26/2008 | mymoney | debt management The rich are in trouble                                          Page 6 of 6

                         Solar Heating
                         I installed a solar prefeed system myself..150l geyser and solar
                         cost..R8000...We are saving about R180 a month as a family.. but with elec. price
                         increases i expect payback within 3 yrs. and ongoing increasing savings.... aj

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