How to Manage Debt Problems

15 December 2015
Adult woman set inside of her home

2015 has been a tough financial year for many South Africans. We have had repo rate increases, load shedding, a drought, a weakening rand, increased food and electricity prices and a shaky economy. There is still a lot of uncertainty and financial stress as we move towards 2016. Now is a good time to work out how to manage debt problems so that you can welcome the New Year with reduced debt stress.

A sound debt management plan consists of three parts:

Creating a budget

Start by listing all your sources of income, big and small. Collect all your payslips, policy pay outs, interest pay outs, rental income etc. It’s important to know how much money you have to work with so that you don’t overspend.

Now list all of your monthly expenses, big and small. Every rand counts so look at how much you spend on groceries, toiletries, utilities, entertainment, parking, snacks etc.

Next make a list of all the credit providers you owe money to and how much you need to pay each month. You can get this information from your credit report.

Remember to allocate some of your income to an emergency savings fund. Every month put away whatever you can into a savings account that accrues interest. (This emergency fund is not to supplement your monthly expenses. Only use it for emergencies).

Throughout the year there will be expenses that don’t occur on a regular basis like school trips for children, doctor’s visits, holidays or weddings. Allow for a contingency fund for these types of expenses – they always happen.

Preparing a debt repayment plan

The best line of defence against debt is good planning. Now that you have a budget, you will have a better understanding of where your money needs to go each month.

You should aim to pay off your debt as soon as possible by paying any additional income into your accounts. By doing this, you will free up more cash for savings, investments and insurances and as such will minimise any future financial risk.

Make it your 2016 resolution to avoid taking out new debt and to pay off the debt you already have.

Sticking to your plan

Often we forget to keep track of our accounts and expenses which can lead to unnecessary spending, extra fees and unnecessary deductions.

To prevent and manage this, make sure you stick to your budget. Update your expenses daily and make a habit of reviewing and adjusting your budget it on a monthly basis.

For your debt management plan to truly work for you, it needs to become a philosophy and a lifestyle.

Learning to use the money that you have and not relying on credit requires discipline and commitment.

If you need help pulling your credit report and putting your budget and debt repayment plan together, call DebtBusters on 0869 99 0606 to speak to one of our financial consultants.

Good luck!