John Vaughan (Financial Advisor) @ Lucid Living
Recent research by Lucid Living has found that the average person contacting them with debt problems has a total of R220,476 worth of debt in credit cards, overdrafts, personal loans and other unsecured debts.
People are struggling more than ever to manage their money. Below, we have put together some useful tips to combat debt issues.
1. Seek Advice
There are many organisations out there that could help you manage your debt. You should not be alone when facing money troubles. With lenders chasing you for payments on a regular basis it can be extremely difficult to get out of debt completely. If you can’t talk to a family member or friend, contact Lucid Living and speak to a professional credit counselor, who will provide you with objective and ethical advice on pro-actively managing your debt.
2. Evaluate the Problem
Take the time to sit down and work out exactly how much you owe and the interest you will have to pay on top of it. The first step to tackling the issue is to determine precisely how much debt you’re in.
3. Set a Budget
Yes, you have heard this before – but it is the quintessential factor to better manage your money. In order to manage your spending on a day-to-day basis you need to set a budget and stick to it. This will help you track exactly where your money goes. Once you really start counting the Rands and cents you will take note of what you spend the most on and how to cut back. Be honest about your spending habits and budget more than the minimum on credit card payments. Paying the minimum is better than nothing but interest is likely to creep up over time.
4. Priorities Bills
Pay the most pressing bills first and stagger out their pay dates if possible. Protecting your home and car (means of earning an income) from repossession should be paramount.
5. Don’t Take On More Debt
If you are struggling financially it can be very tempting to take out a quick cash loan or borrow just a little to get you through the worst. However, the more you take on, the more you have to pay back. By adding to your debt pile you are only adding to your own stress and making the situation worse.
6. Avoid High Interest Loans
Quick cash microloans tend to have extremely high interest rates. Because these loans are unsecured (not backed by an asset) lenders are permitted (under the NCA) to charge the maximum interest rate. That makes these loans very expensive and you end up paying much more that the original sum borrowed.
7. Get a Professional to Explain Your Options
When you cannot afford your debt or are over-indebted, you have options. Speak to a professional credit counselor and get them to explain your options to dealing with your situation. Lucid Living’s credit rehabilitation plan will allow you to protect your assets from repossession and still pay-off your debts, but in instalments that you can afford.
8. Pay Creditors on Time
It is vital that you try and keep your payments on time otherwise you could wind up with additional fees and late charges. Fees and charges vary from bank to bank, but they all are excessive and unnecessary – if you plan better and avoid them. Remember, you want to reduce your debt, so avoid any circumstance that will add additional costs and increase that debt burden.
9. Set a Goal
Set yourself a goal of when you wish to be debt free. This will help focus you and keep a positive attitude towards debt management.
10. Put Spare Cash Toward Debt Payments
If you’re lucky enough to come by any spare cash (either from a lottery win, prize, extra pay or bonus) put it towards paying off your existing debt. When you pay off one debt, use that instalment to boost your payments on your remaining accounts – that way, you progressively allocate a higher amount to paying off all your debts. Paying more than the minimum is the best way to save money on debt. You will be surprised by how much you save and how quickly you shed your debt.