Master of Money Management

Why you need to read the Latin bits

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So sue me! These are the last words you want to hear from someone who owes you money, for two reasons. The first is because you know they have no intention of paying you and the second is because you know that in order to sue you need pots of cash. For the most part we can protect ourselves if we are careful to put contracts in place but what about the contracts we sign on an almost daily basis that we never read?

Contracts are intended to protect us when we sign up for a service or product. Most purchases of products are hassle free and we don’t have to consult the fine print. However when there is a dispute, we do some major face palming when realise we signed up for something that we didn’t expect. Here are some common contracts that we often sign without thought and the consequences of being on the wrong end of a disagreement.

 Medical Aids

  1. Being subscribed to a medical aid doesn’t mean that you are covered for every event that needs medical intervention. Coverage depends on the type of plan you are on and if you have any pre-existing conditions, Going through your policy document in detail will prevent nasty surprises.
  2. Credit Life is a product that many retail stores, furniture and car dealers offer if you buy goods on a hire purchase contract. This policy undertakes to pay your premiums in the event of a job loss or your death. Most people believe that this cover extends for the entire period of the contract but some only cover the installments for three months. These policies may have numerous exclusions, for example if you resign or you are retrenched, you will not be covered.
  3. When you insure your car there are a truck load of rules that you have to follow in order to qualify for coverage. Your driver’s licence has to be valid, your tyres have to be roadworthy, you have to notify them if you change your address or usage of the vehicle, the car must be well maintained. Check your policy carefully-every insurer has different rules, assumptions can be costly.
  4.  Second marriages need careful attention when it comes to estate planning. If your children and ex-partner are named as beneficiaries on your policies and you decide to make your new partner a beneficiary, it is simply not sufficient to change your will to include your partner the policy document must be changed. If you have children with your new partner, it is not sufficient to say ‘my children’; each one of your children has to be named. A reputable financial advisor will ensure that this important information is implemented.
  5. A will that has not been drawn up properly can cause headaches for your beneficiaries. Always get an attorney to look it over. Ensure that it is updated regularly to reflect your changed circumstances. The last thing you want is your ex-partner AKA Henri the Horrible inheriting you possessions. Wills are governed by strict requirements, by failing to adhere to them, your will could be rendered null and void and the court will decide the fate of your estate.
  6.  At some stage it is likely that a friend or family member will be denied credit, and they may ask you to sign surety, this means that you guarantee the lender that you will cover the payments in the event of the friend or family member defaulting. A surety is a totally binding agreement and if the contract holder defaults, the bank will pursue you vigorously since you are just as liable for the money as the contract holder. Never sign a surety for someone you do not know intimately and even then try and find good reasons not to. If they default and you are unable to pay, your ability to get credit will be compromised.
  7. Long-term investments are important for financial planning. When you commit to a long-term investment, you need to consider affordability and flexibility. If you choose a tax-deferred retirement annuity, the money will only be accessible when you are 55; therefore it is imperative to ensure that you can sustain the payments. If you need access to the money earlier, then you need to consider an alternative investment. Endowment policies are also subject to rules committing you to the entire period, but the investment terms are much shorter. If you cancel an endowment, you will be paid out but you will pay significant cancellation fees. You should consult a financial advisor to find the product most suitable for your needs.

Don’t be malaise-fair when it comes to fine print, take time to read it so there are no nasty surprised when you can least afford it.


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