Spring is a great time to reflect on your finances. You might have taken more debt than you can repay or spent more than you can afford, but there are four steps you can take to bring renewed hope to your finances.
Review your budget
Our goals change now and then. So, this may be the perfect time to check if your budget is still in line with your new goals. Make improvements where you can. Ask yourself if your money is still going where you want it. Are you spending more than you can afford?
One way to do this is by taking out a paper, and write down your total monthly income, and all your expenses. Check how much of your spend goes to wants and how much goes to needs. If you can still afford luxuries, there may be no need to change your budget, but if you can’t, draft another one, and allocate money where it’s needed the most.
Review your debt
A rule of thumb is that your debt should never exceed your income. If your debt to income ratio is more than 36%, it’s time to take steps to reverse the situation. The first step would be to stop taking out more debt. Destroy your credit cards so that you’re not tempted to use them.
If you have more than one creditor you can ask one of them to consolidate your loans so that you can save on transaction fees, reduce your instalments, and pay one creditor. However, be warned that consolidation from a credit provider could increase your debt because it is a loan.
At DebtBusters, we help overindebted consumers restructure their debt through debt counselling. If you’re struggling to pay your debt, we can negotiate lower instalments, interest rates, and a longer repayment plan with your creditor.
Review your insurance
Many people purchase insurance and leave it on autopilot. They don’t update or review, only to be dealt with nasty surprises when they claim. You should update your policy every time there is a change in your life. Did you add a new family member? Congratulations! Add them to your life policy. If you bought a new TV, ensure that it’s in your home contents insurance.
Equally important is shopping around for better premium rates. See if you can’t find an insurer that can offer lower premiums for the same service or better. However, you should never exchange higher premiums for poor service. The benefits of your insurance are more important than the premiums.
Review your savings plan
Ideally, you should save 20% of your salary. Can the amount in your account last you for three months if you were to lose your income tomorrow? What if you were to lose your phone? Would you be able to replace it without taking out a loan?
Saving involves more than having an emergency fund in place, it also involves your retirement fund and your children’s education.
DebtBusters is here to inject some sunshine into your finances. Contact our friendly consultants at [email protected] or call 086 999 0606.