How to Get Out of Debt and Avoid the Debt Trap

Invest in Yourself - Dont be tricked by the debt trap

SARB cuts interest rates to 6.25% / Tips on how to tackle and overcome DEBT/ Get out of the debt trap

Interest rates are relatively low currently. What does that mean for the South African individual?

It simply means that if you have debt, you will be paying less, but this shouldn’t be an excuse for you to spend more. Financial journalist, Mya Fischer-French recommends the following: “ It’s important to understand how a little bit makes a lot of money over time. On a million-rand mortgage over 20 years you will now save R165 per month. You could go out for dinner…. or phone the bank right now and tell them I want you to keep my instalment exactly the same -don’t drop it by R165. That will knock off a whole year off your repayment and save you 76-thousand- rand!”

Do you want out of feeling trapped in never-ending debt repayments with no way out? Don’t beat yourself up, instead, sit down with a cup of coffee and come up with a plan. Here are some tips to help you:

Let’s start with Drawing up a budget for yourself and listing the following:

  1. Fixed amounts you pay every month (clothing accounts, car premiums, bond, rent etc.)
  2. Calculate the average amount you would spend on variable monthly expenses (water and electricity, phone accounts, credit card payments, account payments, food expenses, petrol, clothes, entertainment, etc.)
  3. Calculate your annual renewal fees or maintenance payments (license renewals, vehicle repairs and maintenance, annual membership fees, school fees, home repairs, birthday presents etc.) Divide these amounts by 12 to give you an estimate of what you should be putting away each month to cover these expenses.
  4. Highlight the non-essential items in your expenses list. This is normally referred to as your wants and find a way to reduce your wants. Remember there will be a time down the line where you paid off most of your expenses and you can spoil yourself with that holiday or even a pair of shoes. You would have deserved it and the sacrifice will be worth it.
  5. Next, draw up a spreadsheet for all your debtors with five columns, noting the creditor, the amount you owe, your monthly repayments, what rate you are paying and how many installments are left on your repayments.
  6. Select one of your short-term debt repayments, with the highest interest rate identified and pay a bit extra to reduce this debt (10% – 15 % more)
  7. Pay off your debt first, then you invest.

Take control today so that by next year this time, you will be well on your way to enjoying a wealthy, healthy debt-free lifestyle. If you liked this article and seeking advice on how to manage your debt, contact us today

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