According to a TransUnion study, 8 out of 10 South Africans say their household income has been negatively affected due to the pandemic. To help them cover their monthly expenses, consumers have relied on credit to help them through these difficult financial times.
To add further fuel to the fire, TransUnion found a clear trend in personal loan delinquencies of payments past due by 30 days or more. And according to an NCR study, 16% of respondents said that they are more than 3 months in arrears on their store cards and/or credit cards.
The past 2 years have not been easy on our finances and many of us are experiencing a deteriorating financial situation.
Here are 5 things you can do to help combat your debt.
1. Assess your current debt situation
Even though it may be daunting, it’s important to know the total amount of debt that you owe. Having a clear understanding of your debt will help you formulate a plan to eliminate that debt.
To become debt-free as soon as possible. It helps to visualize what you owe and what steps need to be taken to achieve that goal.
You may have multiple debt accounts like credit card debt, a personal loan, student loan, store card debt etc. It may seem impossible to pay off all these accounts at first, but if you have a clear plan, you’ll be debt-free in no time.
Check your credit report to see where you are standing financially. You can get your credit report for free here.
2. Determine the account details
After you’ve compiled all your debt accounts with the total amounts owed, it’s time to dig a little deeper and read the fine print.
There are three primary details you’ll need to successfully pay off your debt. These are:
- The due date for each debt repayment
- The minimum monthly debt repayment amount
- The interest rate for each account
These details will help you determine what the best debt repayment plan is for you.
3. Choose your strategy
Once you have a good understanding of what your financial situation looks like, it’s time to create your repayment strategy. There are two main debt repayment strategies
The Debt Snowball method focuses on paying off the smallest accounts first while paying the minimum amount on all the other accounts. When you pay off the first account you’ll add the repayment amount to the next smallest account. Repeat this process until all your accounts are paid off.
As you progress through your accounts the repayment amount gets bigger and it becomes easier to pay off the big debt accounts.
For more information about the Debt Snowball method click here.
The Debt Avalanche method is another great repayment strategy that focuses on paying off debt with the highest interest rate first while paying the minimum repayment on all other debt accounts. Once you’ve paid off the account with the highest interest rate, move on to the account with the second-highest interest rate. Repeat this process until you are debt-free.
For more information about the Debt Avalanche method click here.
4. Control your spending
Now that you know how you’ll get yourself out of debt, you need to learn how to control your spending. When it comes to getting your finances back on track, budgeting becomes vital.
To help you become debt-free as quickly as possible, cut back on unnecessary spending and keep a close eye on your monthly budget.
If you need help creating a budget click here.
5. Celebrate the small wins
Paying off all your debt by yourself will take time. So being patient and staying motivated are important ingredients for paying off your debt successfully.
Remember to celebrate the small wins to help you stay motivated and remind yourself of your financial goals. You can celebrate your achievements in a simple way like treating yourself to a glass of wine or your favourite snacks.
You can incorporate these small wins into your repayment plan. How will you celebrate when you achieve your repayment goals?
Keep in mind that paying off your debt takes time, so trust that your repayment strategy will work and that you will become debt-free sooner than you think.
If you are in a position where you really can’t afford any of your monthly expenses, you may be over-indebted. Use our online calculator to check if you need professional assistance with your debt.