Stepping into the challenge of adulthood with a brand new job, yet simultaneously managing the debt of a student loan — can become very stressful.
If this is you, you’re not alone:
Nearly 25 million people in South Africa are in debt, and nearly half of them are behind with their repayments, according to the National Credit Regulator (NCR).
Research also tells us that most South Africans regularly run out of money before the end of the month, if not halfway through. It happens so easily, you have landed your dream job, and the impulse to spend your money on looking good or driving the latest car is overwhelming.
Many succumb to the easy credit offered by payday loans, even just to meet living expenses… Imagine this added debt, heaped on top of a student loan! Not to mention the damage it might do to your credit score.
To help you avoid becoming one of these over-indebted statistics, we’ve compiled the top 6 tips — common mistakes to avoid, and bad habits to break — while you’re still young (and hungry, and smart):
1. Living without a budget.
It is crucial to live within not only a monthly budget but a daily budget as well. Don’t let your money burn a hole in your pocket… it doesn’t have to be spent just because it’s there.
A budget helps keep your spending in check, and debt spiralling out of control. Keep track of your spending and expenses for a day, a week, a month, to get a realistic picture of what you need to allow for. Make sure to plan for a little fun, if you can, and tiny rewards for keeping to your limit. Build-in buffers and make sure you leave a little extra, if possible. Avoid using credit to purchase goods and only work on your salary.
You can also review this article for more info on how to budget:
2. Cash is king
Avoid debt as much as you possibly can. This includes credit cards, personal loans and store accounts. Even small monthly payments quickly add up and can take on monstrous proportions!
When CASH rules, the cards can’t rule you. If you don’t have the cash to purchase that new pair of shoes, it’s not meant to be. Not yet, anyway… all things come to those who wait. Soon you’ll be making money instead of simply spending it.
3. Living beyond your means.
As in those shoes you don’t need (yet). It pays to think twice before purchasing that vehicle on finance knowing it will place you in a tight financial situation.
Since you’ve now cut up and thrown away those credit cards (for now…), impress your friends or colleagues with clever buys and creative no-name brand clothing, cycling to work or honing your chef skills instead of eating takeaways every day.
4. Paying bills late.
It’s immensely important to pay your bills on time, which you can if you live without credit cards, within a budget, and not beyond your means. Paying your bills late can add a lot of unnecessary stress, give you stomach ulcers, tarnish your credit report and give you a bad credit score!
On the other hand, building up a good reputation with your credit is as good as money in the bank when you REALLY need it. You know, for when the rain comes.
5. Not checking your credit report.
It’s of utmost importance to keep track of your credit report annually or even monthly, to check your progress. A bad credit score will follow you for a while and it will take time to repair the damage.
Be aware of your financial health, and pending wealth. Think of it as that exam you need to score in to get top grades. The kind of grade that opens opportunities. This should be fun to do if you’ve followed the above recommendations!
You can draw your free credit report here.
6. Living paycheck to paycheck.
If you’ve been watching your budget carefully, sticking to cash, been building up some money by saving and making sure all bills are paid to keep that credit score healthy — you could be putting away a neat little nest egg by now. But…if you find that you’re still living from paycheck to paycheck this should be a red flag for you. It will be necessary to sit back and carefully look at your finances, redo your budget and see where things are going wrong.
Don’t hesitate to reach out to professionals such as a debt counsellor to help you bring down your monthly debt repayments and lower your monthly instalments. We’ve provided debt relief to more than 30 000 South Africans and are ranked as the #1 debt counsellor in SA.
If you need immediate financial relief and would like to get your finances back on track, leave your contact information below and one of our consultants will gladly contact you.