The holidays are here and as we get wrapped up in the excitement of the festivities it becomes easy to overspend, leaving you high and dry in January. Here are 5 debt help tips to help you stay financially festive.
27 November 2012
It is always useful to have some money saved which you can use to pay for unexpected expenses when they come along.
Being under debt review is a successful way of solving a debt problem. The idea is to reduce payments each month to your creditors to an affordable amount whilst paying back as much as you can.
Having said that, even while under debt review, where possible it is extremely sensible to put aside some of your income each month to fall back on in case of unexpected expenses such as a surprise car repair bill or broken washing machine. This is why DebtBusters will put certain amounts in your budget such as a ‘contingency’ and we recommend this is saved.
If you have some savings to fall back on when these situations crop up, it will mean that you can pay for them without having to miss one or more of your monthly repayments and therefore put the agreement at risk.
How much can I save?
When you start debt review agreement, you have to calculate what you can afford to pay your creditors each month. This is done by deducting your living expenses from your income. You use what is left over to pay your creditors.
Your creditors must be convinced that you are making your best effort to repay them as much as possible or they will be unlikely to agree to your proposed payments and will not agree to any concessions on interest and charges. For this reason your creditors will not allow you to include a specific amount for saving in your monthly expenditure budget.
Having said that once your living expenditure budget is agreed, if you believe that you can live slightly more frugally there is no reason at all why you cannot save part of the allowed budget each month.
How to save
If you believe that you can save some of your living expenditure budget each month, in order to make sure you do actually put this aside, you need to plan to save.
The best thing to do is first work out what you can afford to save each month. For instance, if you have a car and/or house, then you will have a maintenance amount in your budget, which should be saved until it is required. Once you understand this figure, make sure you put this money aside at the beginning of the month when you receive your income.
Saving at the beginning of each month will ensure that they money you want to save is available.
If you wait until the end of the month, more often than not you will find that the money you planned to save has already been spent. Saving when you can afford as soon as you receive your income will mean that you do not miss it.
You should put the money you save into your savings account. It is best to ask your bank about opening an account which is right for you and has the highest interest rate.
Pay off more rather than save
There is an argument to say that rather than saving each month, it is best to pay as much as you possibly can to your creditors so that they are repaid as soon as possible.
Being under debt review will normally be for a number of years and during that time, you are bound to need some emergency funds to fall back on. If you have some money saved, this situation will not be as much of a challenge.
If you are able to save, you will also have the opportunity to settle your debts early with a lump sum which will mean that they are paid off far more quickly and when you have a lump sum make sure you call us to discuss the best option for you.
Saving whilst you are under debt review is therefore an extremely sensible policy and should be done whenever possible.
Visit www.debtbusters.co.za for useful guides, calculators and information designed to help you understand how to manage and resolve debt problems.