A great deal has been said about the difficulties that the consumer will be facing in 2016, with interest rates currently in an upward cycle wreaking havoc on repayments; coupled with the rising cost of food and general inflation; a hard look at your debt is in order.
“If you feel panicked by the amount of debt you have and you feel you aren’t just making it month to month, it’s best to start taking action soon, because things are going to get tougher before they get better,” warns Eunice Sibiya – Head of Consumer Education at FNB.
Signs that your debt is out of control
There are a few signs and financial behaviours that indicate that your finances are in trouble or that you are headed in that direction.
“Taking out a loan to pay off alternative credit is a sure fire indication that your finances are in shambles,” says Sibiya. “Other indicators are if you find yourself missing some of your debt repayments and paying a few instead of being able to afford all your debt monthly, then you are in trouble. Also, if you are using credit to finance a lifestyle you can’t afford, you are sadly way in over your head.”
The first step is to recognise that you have a debt problem and commit to sorting your finances out. Below are a few tips and tricks that serve as a good strategy to start on your journey to recovery.
Draw up a list of your debt and decide which is the most important to pay off
The first step to take when trying to get rid of your debt is to draw up a list of all your debt and decide which is the most pressing or expensive. Ideally you should aim to get rid of debt with the highest interest rates.
“The higher the interest rate, the more you are paying on servicing the debt,” says Sibiya. “So aim to reduce these debts first.”
These debts will include store accounts and unsecured loans, such as credit cards and personal loans, etc.
Draw up a budget and prioritise your debt
Once you have a better understanding of your debt and which is the most pressing, you can now draw up a budget that will allow you to prioritise your ‘debt crunching mission’.
Remember this process shouldn’t cripple the rest of your life – so while the idea is to rid yourself of debt quickly, your budget should be realistic and allow you to still live a comfortable life.
Seek professional help if you can’t manage on your own
“If you are highly indebted and are unable to recover on your own, debt review maybe a solution, however it should also be a last resort,” says Sibiya. “A debt counsellor will be assigned to you and is responsible for all your finances. However, it still remains your responsibility to keep tabs on the progress made. Take note – under debt review consumers are not able to take on any further debt or use credit cards and will need to stick to a very strict repayment process,” says Sibiya.
You will only be released from the review process once your debt counsellor gives the go ahead, which means you can’t voluntarily remove yourself from the process. Debt review is also not free of charge and costs will differ.
Fortunately it’s not all doom and gloom, restoring your finances is possible with a few lifestyle changes, and a commitment to the process.
“It’s important to remember that no strategy will work without a healthy dose of self-control and discipline on your part, we all know that you can’t fix a problem with the same mindset or habits that created it,” concludes Sibiya.
Alan Straton
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