Share

Five debt management errors

Shutterstock [http://www.shutterstock.com]
Johannesburg - How do people get into debt-trouble? It’s far easier than you might imagine, and it creeps up on you! Five common mistakes:

1. Living beyond your means

Credit is so easily available – even now, when times are hard and the implementation of the National Credit Act – that it’s easy for people to believe they can afford all the extras: flat-screen TV, a high-powered laptop, a new car every two years, annual holidays at the sea and the like.

Sit down and work out how much all your debt is costing you. You might be shocked to discover what you are paying in interest alone.

Understanding your true debt situation will help you to develop a financial plan and budget for a more realistic life.

2. Failing to plan

A monthly budget will help you to identify the expenses that really do matter: apart from food, home-loan payments, lights and water, what do you spend your money on?

Understanding how you spend will enable you to cut down on unnecessary expenses and ensure you have money to repay debts and afford small luxuries that you regard as essential.

3. Ignoring the problem

If you are drowning in debt, your best policy is to face it. Some of us are so scared we can’t even bring ourselves to open our monthly credit card statements!

The longer you ignore it, the worse it will become, thanks to compound interest. If you can’t figure out what to do on your own, seek help from a financial advisor.

4. Using debt to cover debt

If you’re battling to pay your debts, one of the worst things you can do is to increase your overdraft. You will feel immediate relief as the injection of available funds enables you to pay pressing debts; but next month you will be in the same squeeze.

Another terrible strategy is to take out an additional credit card; credit card debt incurs high interest rates and boosts the amount you owe dramatically.

5. Not communicating with your creditors

People deep in debt are often frightened, and they can’t face their creditors, the companies to whom they owe money. But one of your best strategies is to talk to them as soon as you realise you’re in a crunch.

They are likely to treat you better if you tell them you’re in difficulties than if you simply default, which brings the big legal guns down on you.

Ask what you can do about re-scheduling debt: can you pay smaller amounts for a time, can you extend the repayment period?

Add your voice on the Debt Issue:

*Ask our experts
*Share a personal story
*Write a guest post

We live in a world where facts and fiction get blurred
Who we choose to trust can have a profound impact on our lives. Join thousands of devoted South Africans who look to News24 to bring them news they can trust every day. As we celebrate 25 years, become a News24 subscriber as we strive to keep you informed, inspired and empowered.
Join News24 today
heading
description
username
Show Comments ()
Rand - Dollar
18.93
+0.0%
Rand - Pound
23.90
+0.0%
Rand - Euro
20.40
+0.1%
Rand - Aus dollar
12.33
+0.1%
Rand - Yen
0.13
-0.0%
Platinum
908.05
+1.2%
Palladium
1,014.94
+1.3%
Gold
2,232.75
-0.0%
Silver
24.95
-0.1%
Brent Crude
87.00
+1.8%
Top 40
68,346
0.0%
All Share
74,536
0.0%
Resource 10
57,251
0.0%
Industrial 25
103,936
0.0%
Financial 15
16,502
0.0%
All JSE data delayed by at least 15 minutes Iress logo
Company Snapshot
Editorial feedback and complaints

Contact the public editor with feedback for our journalists, complaints, queries or suggestions about articles on News24.

LEARN MORE
Government tenders

Find public sector tender opportunities in South Africa here.

Government tenders
This portal provides access to information on all tenders made by all public sector organisations in all spheres of government.
Browse tenders