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Johannesburg - The biggest challenge for people in debt is resisting the urge to spend or incur more debt, according to Gavin Payne, executive head of retail risk at Nedbank.
"Getting out of debt requires great discipline. It is important not to add to your debt, particularly now, given that we are at the start of a rising interest rate cycle," he said.
"Getting out of debt is not an impossible challenge. The solution begins with the correct attitude and a commitment to resolve or improve the situation, undertaken in small steps that will result in dramatic change."
He offers guidelines for dealing with financial distress:
Be realistic about your financial situation
It’s always important to be honest and realistic about one’s financial situation before you even take steps to address the problem.
Then you need to dedicate time to evaluate your overall financial situation, including the debt component.
Come up with a draft breakdown of your finances, taking into account your expenditure against your monthly income or any other form of affordability.
Thereafter, plan your debt management activities as part of your overall financial plan for the year or period ahead to build financial fitness in the long term.
Once you’ve reached the point of honesty and realisation, you’re likely to come up with a solution which is not going to exacerbate your situation.
Be proactive
When you are in financial difficulty and cannot make the minimum payments on your debt, be proactive.
Don’t bury your head in the sand. Talk to those you owe money and explain your circumstances.
You may think you’re admitting defeat, but this is the first step to dealing with the issue.
If you are open and honest and go to your creditor with a clear plan of how you plan to pay off the debt, they will be more understanding and more likely to work with you to make that happen.
Furthermore, if you are upfront with your creditor they can assist you by possibly rearranging or restructuring your debt.
This may mean entering into a debt restructuring process, where an expert will analyse your finances and work out how much you can pay back whilst keeping enough for basic living expenses.
They can even negotiate on your behalf to reduce the minimum amount payable and possibly even the interest owed on the debt.
Since 2009 Nedbank has restructured over 20 000 home loans, allowing families to retain their homes through effective rehabilitations.
Take small steps
Paying off debt may seem like a mammoth task. However, one that plays a critical role in building financial fitness.
Therefore, it is important to explore various steps that will assist in reaching this goal.
- Don’t be afraid to cut back your expenses. Live within your means.
If you’ve done this and your expenses are still too high, then consider downgrading on your car or home or getting a part-time job to increase the cash flow.
- Start using cash when you shop. Research has shown that simply by paying in cash, people don’t spend as much.
In fact, paying in cash tends to save people between 12% to 18% when making purchases.
Don’t make any more debt
Before you think about how to start paying off your debt, you need to stop adding to it.
Close those retail store accounts and cut up your credit cards. The temptation to continue using them again is strong, so eliminate the option.
- Fin24
Help us help you by taking our second annual Debt survey and you could win R3 000, or add your voice by sharing your debt experiences, debt-busting tips and insights. Have a question? Ask our experts.
"Getting out of debt requires great discipline. It is important not to add to your debt, particularly now, given that we are at the start of a rising interest rate cycle," he said.
"Getting out of debt is not an impossible challenge. The solution begins with the correct attitude and a commitment to resolve or improve the situation, undertaken in small steps that will result in dramatic change."
He offers guidelines for dealing with financial distress:
Be realistic about your financial situation
It’s always important to be honest and realistic about one’s financial situation before you even take steps to address the problem.
Then you need to dedicate time to evaluate your overall financial situation, including the debt component.
Come up with a draft breakdown of your finances, taking into account your expenditure against your monthly income or any other form of affordability.
Thereafter, plan your debt management activities as part of your overall financial plan for the year or period ahead to build financial fitness in the long term.
Once you’ve reached the point of honesty and realisation, you’re likely to come up with a solution which is not going to exacerbate your situation.
Be proactive
When you are in financial difficulty and cannot make the minimum payments on your debt, be proactive.
Don’t bury your head in the sand. Talk to those you owe money and explain your circumstances.
You may think you’re admitting defeat, but this is the first step to dealing with the issue.
If you are open and honest and go to your creditor with a clear plan of how you plan to pay off the debt, they will be more understanding and more likely to work with you to make that happen.
Furthermore, if you are upfront with your creditor they can assist you by possibly rearranging or restructuring your debt.
This may mean entering into a debt restructuring process, where an expert will analyse your finances and work out how much you can pay back whilst keeping enough for basic living expenses.
They can even negotiate on your behalf to reduce the minimum amount payable and possibly even the interest owed on the debt.
Since 2009 Nedbank has restructured over 20 000 home loans, allowing families to retain their homes through effective rehabilitations.
Take small steps
Paying off debt may seem like a mammoth task. However, one that plays a critical role in building financial fitness.
Therefore, it is important to explore various steps that will assist in reaching this goal.
- Don’t be afraid to cut back your expenses. Live within your means.
If you’ve done this and your expenses are still too high, then consider downgrading on your car or home or getting a part-time job to increase the cash flow.
- Start using cash when you shop. Research has shown that simply by paying in cash, people don’t spend as much.
In fact, paying in cash tends to save people between 12% to 18% when making purchases.
Don’t make any more debt
Before you think about how to start paying off your debt, you need to stop adding to it.
Close those retail store accounts and cut up your credit cards. The temptation to continue using them again is strong, so eliminate the option.
- Fin24
Help us help you by taking our second annual Debt survey and you could win R3 000, or add your voice by sharing your debt experiences, debt-busting tips and insights. Have a question? Ask our experts.
