In August, the Bank of Namibia (BoN) cut its benchmark interest rate by another 25 Basis Points (BPS), a standard unit of measure for interest rates, to a record low of 3.75 percent, after the South African Reserve Bank's interest rate was cut by the same margin in July. It is the lowest interest rate ever recorded in Namibia.
BoN also announced that commercial banks had granted debt relief worth N$ 9.2 billion to sectors affected by the COVID-19 pandemic. These decisions were put in place to mitigate the economic challenges caused by COVID-19 such as salary cuts, job losses, and the reduction in incomes for individuals, households, and businesses. The result is an increase in high debt levels.
Dealing with debt might not always be pleasant. However, with a solid plan, debt can be managed, reduced, and even eliminated. With the added pressures of COVID-19, here are a few suggestions to consider to reduce your debt during these challenging times:
Create an emergency budget: Draw up a budget based on your current income and your monthly expenses. A household budget works best when everybody is involved. Sit with your family and discuss ways to reduce costs and how you can save money. Make them accountable for contributing toward savings. Consider, for example, placing non-essential monthly items like subscription fee services on hold, carpooling to save on fuel and taking packed lunches to work and school. At the end of the month, show your family how much was saved and how your emergency savings has grown as a result of the collective effort.
Track your spending habits: Make a habit of tracking your spending. On your tracker, state where you spent your money and on what. Use Bank Windhoek's AlertMe service notification, which notifies you whenever transactions occur on your accounts, be it debit or credit transactions. The Bank's AlertMe SMS service, tracks your spending by informing you where you swiped and for how much. This is a handy tool for managing your budget. Subscribe to get your monthly statement by email and at the end of the month, check your statement for any inaccuracies.
Take charge of your debt: Make a list of your current debt obligations from the highest priority to the lowest, recording their monthly instalments and arrears, if any. For instance, mortgage and vehicle payments must take precedence, followed by credit cards and other high-interest debts like clothing accounts. Have a clear understanding of your debt, what each of the lenders is willing to do for you, and how you will tackle your debt, then develop and execute your plan.
Tackle smaller debts first: Pay off debts with smaller balances first as this would free up money to put toward your more significant and high-interest rate debts. From your debt list, figure out which one has the lowest balance and work on settling it as soon as possible. Then, close the account. As you get rid of small debts balances, put that same monthly payment toward another debt balance.
Seek advice if you are uncertain: Keep in mind that people need help right now, and banks and other lenders are working hard to support you. They will appreciate you being proactive and help you find solutions.
Getting your finances sorted out as soon as possible goes a long way to alleviate your money worries. It is also good for your mental health, as it will alleviate some of the tension and stress you might be feeling. Contact your Bank Windhoek Branch for further information and assistance.