Debt problems have caused many consumers to drown in their finances and fall way behind in their payments. The way to make your financial life simpler and easier to manage is by staying ahead of your debts and be the one in control of the situation rather than the debts controlling you.
There is a stigma that having any sort of debt is bad, and that consumers should always strive to live 100% debt free. This is a myth, as life in South Africa is essentially impossible without incurring some form of debt along the way. A mortgage, holidays, vehicle finance – many things are unaffordable without the assistance of a creditor. The problem arises when consumers do not apply effective debt management advice and begin to fall behind on payments, or suddenly find themselves without any money to cover all their expenses. The trick with debt is to always stay ahead of it, and below we will list some simple debt management advice that will make your debts easy to direct.
Always calculate the maximum. When taking out a store account or credit card, ask your creditors upfront what the maximum repayment on the account will be, and use that amount when working out your budget. This way if you overspend on the account, you won’t be caught unawares when the bill comes.
Above and beyond. Calculate an extra 10% into your payment, and pay it. This will mean that you are always paid up ahead, and should there be a month when you can’t afford the full instalment, you would have covered it with the extra 10% from previous month’s payments. It will also ensure that your debts are paid up faster.
Afford it before approving it. When considering a new debt, work out your budget with every eventuality included and if your debts exceed 40% of your monthly income – do not sign. Rather start a savings account and save up for those luxury purchases.
The key to effective debt management is following this advice and having a sound long term strategy in place. Debt management advice lies in logic and planning for all possibilities.