Cape Town - Everyone strives to be debt-free or at least at a point where their debt is manageable.
Getting there is not easy, but here are 10 quick steps to a debt-free life.
1. Be honest about how much debt you have, and how you accumulated it. This is not a comfortable or easy thing to do.
2. Draw up a realistic budget for your living expenses. Keep it handy and review it regularly. If you are struggling to live on your salary, you need to either find a way to earn more, or a way to spend less.
3. Do your utmost to make the minimum payments on your outstanding accounts. Falling behind on even missing one payment can start a domino effect and lead to disaster. It is tough trying to hack your way back to financial health once you are dealing with interest payments on arrears.
4. Learn how interest works – and find out exactly what it is costing you to buy things on credit.
5. Don’t just lurch from month to month in quiet desperation. Set a manageable goal for yourself (such as reducing your overdraft by R500 a month) and reward yourself in some way for doing this. Have an image in your mind of living a debt-free life and what it would feel like. You want to get to a point where you earn interest, not pay it.
6. Make a concerted effort to save money. This could mean cutting down electricity usage, moving to a bank with lower bank charges, and becoming a bargain hunter. These savings can be used to make extra payments on some of your smaller (or bigger) debts.
7. When you have finished paying off one account, take that amount and put it towards paying off another account. You are already used to living without that money – make it work for you. The last thing you should do is to incur another debt.
8. Always pay your creditors a bit extra when you can afford to do so. If you have a windfall, use some of it to pay off debts: don’t go on a shopping spree. This will see you paying off your debt more quickly than expected, and it could save you some interest charges. It also gives you a bit of leeway if you have a real crisis one month.
9. Don’t just suffer in silence. If you cannot pay your debts, contact your creditors, so that they know you are serious about the money you owe them. Otherwise they might think you are trying to dodge your responsibilities. Consider options such as debt counselling before legal action is taken against you for unpaid debts.
10. Even if you have a debt counsellor or financial adviser – never lose control of your finances. Always know exactly what your position is with regard to your debt. It is YOUR debt – how you manage it determines your life.
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