Debt Management

I’m in debt, can you help?

REAL, DO-ABLE WAYS TO GET OUT

You’ve got a great job, a flourishing career and are finally earning a decent wage – so why is it you still struggle to make ends meet each month? Which of us hasn’t stalled an account payment, had a credit card rejected, or fobbed off the family with fishfingers the week before pay day? The reality is that if you’re doing any of these things, you’re courting debt, and the consequences can be cruel. Credit judgements have reached an all-time high, and some 1,2 million women have court judgement information recorded against them by one major South African credit bureau alone – information that will stain their credit profile for five years. Are you financially free or a walking overdraft?

Check the signs:

  • You are unsure exactly how much you owe and are afraid to add it up;
  • You have more than four monthly accounts, including retail store and credit cards;
  • You miss account payments, and pay only the minimum or less on your credit cards;
  • You often juggle bills, and pay some or all of them late;
  • You postdate cheques so they don’t bounce;
  • You get calls and overdue notices from creditors;
  • You have reached the limit on your charge cards;
  • You have increased your number of credit cards;
  • You are getting cash advances from one credit facility to make payments on others;
  • You have stopped contributing to a savings plan, perhaps even eroded your emergency fund – set aside for the unexpected, like a fire or being fired.

If you have identified with two or more of these points, you might be on your way to Debtsville.

Do the sums. How much do you owe?

  • Include accounts, credit cards, car and home loans, the works. Be honest. How about your best mate, your mom or anyone else you’ve been sponging from?
  • Pay off smaller accounts first, followed by accounts with the highest interest rate. Call the company and ask them to reduce their rate – tell them you will transfer the amount to another card if they don’t.
  • Talk to your bank manager and arrange an overdraft facility – overdrawing without one is not just embarrassing, it can affect your credit rating.
  • Check that you’re paying the lowest possible rate of home loan interest, and know how much your monthly repayments will increase if rates go up.
  • If you do all your banking though one bank (home loan, cheque account, savings etc.) you should qualify for a small reduction in your home loan base rate and possibly for lower service fees – ask.
  • Consider life cover, retrenchment or disability insurance on your home loan.
  • Where is your money going? Everyone needs to eat, a roof over your head and clothes (so don’t beat yourself up for buying a suit when you need it). But if you are in debt, you are spending too much on something, so find out what it is.

There are ways out of debt, if you act fast

  • If your debts have mounted to where your monthly loan repayments are more than 20 percent of your income, create a money plan.
  • Go to the people you owe money to. Show them your plan, be honest about your financial situation and get a written agreement from each creditor who is willing to give you more time. Most businesses will respond positively to an honest approach. Stick to your agreements even if it means cutting your living costs to the bone – you’ll be surprised to see how quickly you pay off your debts.
  • Resist the urge to borrow money to pay debt. Interest and admin fees will be charged and your monthly repayments could become even higher.
  • Don’t ignore those letter demanding payment.
  • Keep track of your money and never throw away a receipt.
  • Look into getting a software package like Microsoft Money to help you keep track of what goes where
    Reconsider your approach to credit cards – a debit card may be better
  • Draw up a detailed budget and stick to it. After your rent or bond payment, save at least 10 percent of your salary, divided between long, medium and short-term plans:
    • Long term, you should have a retirement annuity in addition to your company pension fund.
    • Short term, savings for an emergency fund (car repairs, holiday etc).
    • Once this totals R10 000, transfer all excess from then on into medium term savings: fixed deposit, or unit trusts that can be accessed in a matter of days should you face a major emergency.

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