Cape Town – Debt is so terribly easy to incur – and so terribly difficult to get rid of.
With South Africans said to be the biggest borrowers in the world, just about every single person needs to take a look at these debt-busting tips from Neil Roets, the CEO of Debt Rescue.
While these tips sound simple and straightforward, following this advice is clearly not so easy. It’s a bit like telling someone that in order to lose weight they need to exercise more and eat less. That is true – and it will work but doing it is the problem. This is stuff we know, but it cannot be repeated often enough.
Here’s how to avoid falling deeper into debt in 2016:
• Draft a budget every month (taking into account your income, deductions, expenses and monthly debt repayments) and stick to it. Keep in mind that certain costs such as utilities can differ from month to month – that’s why drafting a budget once a year is not enough.
• It is better to save and buy cash. It might sound old-fashioned, but it really does pay you not buy things such as household appliances on credit. The interest payments can be a real killer. If you buy cash you might even be able to negotiate a discount.
• Live within your means. Forget the standard of living you would like to have – the one you can afford is the one you should have. If you consistently spend 10% more than you earn, you will be in debt to the tune of more than one full month’s salary by the end of the year.
• Loans should not be used for day-to-day living. It should only be utilised for buying expensive assets like properties and vehicles. Few people have the cash for houses and cars, but if you are buying groceries and petrol on credit, you are in big trouble. If you need to borrow money on a regular basis to get through the month, you are living beyond your means (or you should look at how you can increase your income). Look at ways of how you can save – even if they sound a bit harsh.
• Steer clear of luxury cars that will break the budget. When buying a vehicle, don’t fall trap to buying something beyond your means. Rather buy an economical vehicle – they are also cheaper to keep on the road. Few things dent a monthly budget quite as much as a massive car payment.
• Do whatever it takes to get a bit of a financial reserve together. Life happens, and you might suddenly need to spend a couple of thousand on car repairs, or a relative’s funeral. Having a bit of a backup can really make all the difference. Living on the financial edge is stressful. Once you have used your reserve, start putting one together again immediately.
• Distinguish between what you need and what you want – do not try and keep up with the Joneses. Everyone gives this advice, but it’s not always so easy. You need a fairly strong sense of self not to feel that possessions say something about you. But that is what advertisers and retailers want you to believe. Do you really think your best friends would dump you if you didn’t have the latest model of mobile phone? If you think so, it might be time to get other friends. Buy what you really cannot do without, not what you want.
• Teach your kids how to work with money. Lead by example – they will do what you do, not necessarily what you say. Teach them to work with a budget, and let them learn the consequences of good and bad financial decisions early on in life. This will have a big impact on them once they are adults.
• Don’t fight the battle alone. As soon as you find yourself in a situation where your debt is overwhelming, seek help as soon as possible by contacting a debt counsellor. Your debt counsellor renegotiates your debt repayments to your credit providers, ensuring you are protected from any new legal action.