Is your debt a problem? Do you worry about whether you can meet your obligations? Melissa America provides tips on how to deal with your debt head on.
26 January 2015
If you do not have a plan to pay off your debts, there is no better chance to start planning than right now! Add “BE DEBT FREE” to your list of New Year’s Resolutions. A debt free plan can mean a stress-free year!
You might think some accounts are more important than others, but in reality all accounts are important and no payment should be missed regardless of the value or type of account. Don’t fall into the trap of placing more importance on accounts such as vehicle finance and home loans and forget about smaller accounts such as your store cards. If you miss payments on these “less important” accounts you will end up with a bad credit record and often legal action being taken against you.
Tips for creating your own personalised Debt Free Plan:
Take control of your debt with these simple steps. Staying on top of your debt repayments has never been easier.
1. Calculate your total net income
Add all the money you receive each month together.
- Include your net salary after deductions. Deductions include Tax, UIF, medical aid, provident fund, and any other amounts that are included on your payslip as a condition of your employment.
- Include all extra regular income such as grants, rental, maintenance and private work.
You will now have your total net income amount.
2. Calculate your living expenses
List all the things you have to pay for each month.
Include your rent/bond, water, electricity, transport/car, groceries, insurance, clothing, medical expenses, cell phone, school fees, bank charges, crèche and any other monthly expense you may have.
Add them all together to get your total living expenses amount.
3. Calculate your debt repayments
- List all your debt repayments that you need to pay each month.
- Include all your store cards, credit cards, overdraft, loans, and any other debt you may have.
- If you do not know what the outstanding balances of your accounts are, you are entitled to a free credit report from a credit bureau once a year. Go to www.transunion.co.za.
- Add them all together to get your total debt repayment amount.
4. Calculate your disposable income
To calculate your disposable income, subtract your living expenses and total debt repayment from your total net income.
The amount you are left with is your disposable income.
You should use this disposable income to pay off your debt quicker so that you can become debt free.
You should also allocate a portion of your disposable income to savings.
5. Prioritise your debt
List your debt according to their interest rate and pay off the high interest rate accounts as soon as possible. These accounts are more expensive and your plan should aim to pay these off quickly.
Tips for avoiding common debt traps:
1. Do not create new debt
If you already have debt, any available disposable income including bonuses should be used towards paying of your debt quicker. Avoid the trap of creating new debt. It will add another monthly repayment to your list of debt repayments. This year focus on paying off the debt you currently have first. If you really need to buy something, save up for it and pay cash.
2. Save for unexpected emergency expenses
Try and put away a small amount of money each month. Having a savings for those unexpected emergencies will help you avoid having to take out an additional loan and getting yourself further into debt.
3. What to do if you don’t have enough money to pay off the debt you already have
If you have a negative balance after subtracting your living expenses and debt repayments from your total net income, then you should:
Cut out unnecessary items from your living expenses. These include DSTV, domestic help, private schooling and excessive spending on non-essentials like alcohol and cigarettes.
If you still don’t have enough money to cover your monthly debt repayments, then call your credit providers and make a new payment arrangement with them. Most credit providers are willing to assist you for between three and six months with lower repayments or a payment holiday. If you do manage to make a new payment arrangement, make sure you stick to it and don’t miss a payment.
4. What to do if you have run out of options and are still struggling to make your monthly debt payments
If after negotiating lower payments yourself, you are still struggling to make your monthly payments, then you need professional help from a trusted debt management company.
DebtBusters, the award winning and most trusted debt Management Company can help you.
We will provide you with a way of reducing your debt in 5 simple steps:
- WE can give you a FREE and CONFIDENTIAL credit assessment
- WE can CONSOLIDATE your debt repayments into one affordable monthly instalment
- WE can NEGOTIATE with your credit providers to reduce interest rates and fees on your accounts
- WE can get you LEGAL PROTECTION to stop creditors from hassling you
- WE can get you DEBT FREE and issue you with a Clearance Certificate – CLEAR YOUR NAME
The process is 100% confidential with no obligation.
Start 2015 with a plan to pay off your debts. You can be debt and stress free – its easy. Call us on 0869 99 06 06 or fill out our online form at www.debtbusters.co.za to have a consultant call you back.
Author: Mandy Snyman (Financial Consultant)