Your ultimate get out of debt guide

Your ultimate get out of debt guide

If you’re buried under a pile of debt, never fear… in just over a few months, you could wipe it all out. We show you how!

The debt begins…

There’s magic in the momentary financial freedom store and credit cards give you to update your wardrobe, buy the kids a few extras for school, or splurge for a dinner party. But throw caution to the wind and you could be crippled by constricting debt. You’re not alone. Around 48% of South Africa’s credit-active women have negative information against their names.

Take action

How serious are you about getting rid of your debt? If you’re still thinking about buying a pair of boots or even a spoil for a friend’s birthday, you’ll never get out of the debt cycle. It’s time to buckle down, and hard. Here’s how:

  • Set up a budget. Once you’ve worked out what you need to spend on groceries, insurance, medical expenses, car and house repayments, phone bills, and household expenses, you’ll know how much you can afford to put into debt repayments.
  • Pay the minimum amount. Don’t default on payments. If you do, negative information about your poor repayment record will stay with the Credit Bureau for two years and can jeopardise your chances of getting credit elsewhere, such as when you want to get finance for a house or a car.
  • Trim the fat. Examine your budget and cut down on expenses.

READ MORE: FREE 52-WEEK SAVINGS PLANNER 

Make the cut

Graham Craggs from Budget Insurance has these suggestions for cutting expenses from your budget:

  • Cellphone: If you know that you should be spending less on your cellphone bill, change your service provider.
  • Entertainment: If you enjoy regular nights on the town, consider cutting down.
  • Dining out: Stop buying lunch at the corner deli or office canteen every day, and pack a lunch to take to work.
  • Groceries: Avoid the convenience store on your way home and stick to your regular grocery shops.
  • Insurance: By shopping around for the best insurance premium you may be surprised at how much you can save.

How to pay off your debt when…

…you’re R5 000 in debt

R5 000 may seem a manageable amount to pay off. But it can snowball. Pay this off as quickly as you can, without putting your other financial commitments under strain. While you may need to tighten your belt for a few weeks or months, you’ll be able to start saving money again. Double your minimum payments where possible. Don’t buy anything with your credit card: every little bit will increase the weight of the yolk around your neck.

…you’re up to R15 000 in debt

You’re probably paying off multiple accounts and cards. Order your accounts from highest interest rate to lowest.
Pay the minimum amount owed on each account. Pay the highest extra amount you can into the account with the
highest interest. For interest-free accounts, pay the minimum payments until you’ve paid off all your high-interest
accounts. Postpone travel and holidays for at least the next six months, as you won’t want to increase the burden to
a point that you can no longer handle it.

“Leave your store cards at home when you visit the mall”

…you’re up to R35 000 in debt

It’s time to strip down to the bare necessities, so that you can put every cent into your monthly repayments. Be careful not to pay more than you can afford – it won’t help having to dip into the money that you’ve contributed to your credit card at the end of the month just to buy groceries. You may need to go the extra mile by cutting out on life’s little luxuries, like takeaways, cleaning services, video and TV services, and unnecessary policies. When it comes to family, be honest about your debt obligations, says Craggs. ‘Communicate this with everyone in the family so that they understand the limitations within which they must live.’

…you’re up to R50 000 in debt

If you find you can’t afford to make debt repayments (including vehicle and bond repayments), says Wikus Olivier from DebtSafe, contact the credit provider to arrange a new payment plan. Credit providers are not monsters – they also need your business and don’t want to repossess your assets. Speak to them before you’re in a position where you’re unable to pay your full instalments with subsequent legal action.

If you have a number of small loans or facilities, consider consolidating your debt, says Natasha Dickinson, from
Compuscan Academy. Consolidation is an option for debt under R50 000 if the total amount is made up of a number
of smaller debts. Consolidation allows you to take a loan for the total amount of debt owed to various credit providers,
and then use this to pay off your debts. That way, you’d only make one payment a month on your consolidated loan.
This means you won’t have to make monthly service fee payments on all your debts.

READ MORE: 6 CLEVER SALARY STRETCHERS

Repayments

Back to basics

Once you have hold of your debt, make sure you don’t end up in the same position again. Robyn Farrell, executive head of 1st for Women Insurance, offers this advice:

  • Reduce the number of credit cards you carry around to just one.
  • Don’t use your credit card unless you’re able to pay the minimum amount due each month.
  • Never buy something you can’t afford.
  • Choose to pay with your debit card or cash rather than using a credit card.
  • Never use one credit card to pay off your debt on another one.
  • Don’t opt for a higher credit limit on your credit card to give you breathing room. It will only hurt you in the
    long run.
  • Set a monthly budget and don’t spend more than that.
  • Keep track of purchases by retaining invoice slips and tallying up your expenditure.
  • Never buy food or other necessities on credit.
  • Don’t open any new retail store accounts. Once you’ve paid others off, close them.
  • For bigger-ticket items, put money away each month until you have saved enough for what you want to buy.

FEATURE: TARYN ARNOTT VAN JAARSVELD AND PHOTO FROM FOTOLIA.COM

 

Joni van der Merwe

About Joni van der Merwe

Your Family’s Digital editor. Avid retweeter. When I’m not scrolling Instagram you’ll find me in my garden. Keen on DIY and I don’t believe there’s anything that can’t be fixed with some chalk paint.

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