BORROWING MONEY ISN' ALWAYS A BAD THING

On the contrary, debt can be a sensible way to build wealth

- BOMIKAZI ZEKA

DEBT, IN some form or another, is part of our financial profiles whether we like it or not-and it can be a useful way to build wealth if it is managed carefully and wisely.

For example, you may borrow money from the bank to buy an asset-a resource of economic value that generates income from its productive use. Investment property is an example. Therefore, investing in an income-producing property can be a good idea.

If you are already in the property market, the home equity you've accumulated- the share of the property value that's yours-can help you buy a second property. This time, you may not need a deposit as big as when you made the initial investment.

In the event that the rental market is booming and your tenants pay you more than what you repay on the loan, municipal rates, and property manager fees, then the wealth-building machine will start to run itself.

However, debt makes many people uncomfortable. In South Africa, someone earning R20 000 a month commits on average 63% of their salary to repaying unsecured debt-such as credit cards, personal loans, overdrafts or 'buy now, pay later' facilities. the share of the property value that's yours-can help you buy a second property. This time, you may not need a deposit as big as when you made the initial investment.

In the event that the rental market is booming and your tenants pay you more than what you repay on the loan, municipal rates, and property manager fees, then the wealth-building machine will start to run itself.

However, debt makes many people uncomfortable. In South Africa, someone earning R20 000 a month commits on average 63% of their salary to repaying unsecured debt-such as credit cards, personal loans, overdrafts or 'buy now, pay later' facilities.