Debt freedom may seem impossible when you are dealing with an overwhelming amount of debt, however, with the right help there is light at the end of the tunnel, and it’s possible to remain debt-free once you get there.
In this blog, we share some important tips on how to stay out of debt and address any persistent negative debt habits or behaviour that may be holding you back. Keep reading to find out how you can get out and stay out of debt.
The first step is always the most important – if you’re struggling, seek professional help or advice from a financial expert.
It may seem embarrassing to talk to somebody about your financial situation but suffering in silence is not the answer. Working with a financial professional can help you to leverage governed programs that put an effective plan in place to consistently eradicate your debt.
Here are our top three ways you can get out of debt:
A solid repayment plan can do wonders for getting on top of your debt. Maximise on methods that have a track record of success such as:
The Debt Snowball
The debt snowball method works by focusing on paying off the smallest debt amount first and then paying off the next highest amount until you reach the largest amount. This method is about building momentum and boosting your confidence in tackling your debt, one payment at a time.
The Debt Avalanche
This approach is similar to the debt snowball method; however, you pay the debt amount with the highest interest rate first and then move to the lowest making your debt repayment speed up over time, much like an avalanche. By paying the minimum on outstanding debt accounts first, and then using extra money to pay off other significant balances, you will end up paying less in total interest.
Also known as debt review, debt counselling assists over-indebted South Africans in simplifying and reorganising their debts through a legally-approved debt management plan. After you get approved for debt review, you will work with a debt counsellor registered with the National Credit Regulator (NCR), to make reduced and consolidated monthly repayments towards what you owe until you are declared debt-free.
The debt counselling method has a myriad of benefits, including the protection of your valuable assets from repossession, little to no contact with aggressive creditors, a reduced monthly repayment amount, and steady progress towards completely eliminating your debt.
A debt consolidation loan is a loan that consolidates your debt in order to make repayments to a single creditor. The positives of a single repayment term include a lower interest rate, reduced installment amounts and an extended repayment time.
This is best suited to an individual with strict financial habits. Furthermore, it is worth noting that your overall creditworthiness and income will decide if you qualify for a debt consolidation loan.
Once you have gotten on top of your debt, it is imperative that you do not fall back into the same habits. Here are some tips to help you stay on track:
Make sure you have a dedicated savings account or interest-bearing investment. Do you know the expression ‘Pay yourself first’? It means that before you pay your monthly expenses, first deposit a certain amount of money into your savings or investment account. This simply makes a habit out of saving.
If you believe earning more money will enable you to cover all your expenses, consider working overtime at your current job or finding part-time employment.
Other than increasing your income, consider decreasing your overall monthly living expenses. This may call for the need to downsize your home in order to decrease rent, sell unused items or cancel recreational memberships or subscriptions.
To save extra money, you may need to reduce the number of times you eat out at restaurants, spend money on recreational activities, order takeaway or go on shopping sprees. On this note, if you find that you spend money emotionally or compulsively, it may be a good idea to seek professional help.
As aforementioned, if you find yourself spending compulsively on items you do not need, it may be a good idea to address this behaviour with a professional. One small way to address this is by adopting an ‘out of sight, out of mind’ approach: cancel any mails you get about sales, cancel retail credit cards and even change where you shop to minimise temptation.
A life without debt is achievable, especially when you make the effort to be disciplined and seek professional debt help when necessary. We hope this blog has shed light on how you can maintain a debt-free life, now and in the future.
Find out if you’re eligible to reduce your debt and protect your belongings.
Disclaimer: This website and any information herein is not intended to be, nor does it constitute, financial, tax, legal, investment, credit, or other advice. Before making any decision or taking any action regarding your finances, you should consult a qualified professional directly.