Struggling to recover from your December debt? You are not alone. In fact, you wouldn’t believe the number of people who get themselves into trouble over December.Holiday debt is the gift that keeps on taking away large chunks of money from your pocket! And, this debt can be with you the whole year, or even longer.
If you fell into the debt trap this past December, Money Psychologist and trustee on the board of Truth About Money – a 1Life initiative, Winnie Kunene shares 6 pointers for getting out of it, as quickly as possible:
1. Sit down and work out how bad it really is – and be honest with yourself! You need to do a calculation of how bad your debt situation really is. This means adding up any credit cards, personal loans, retail cards and any money you may have borrowed from friends and family. Include the debt you had before the holidays – you need to know how much you owe in total. For now, if you have a car loan or a home loan, you can leave those out of the calculation.
2. Don’t just pay back the minimum amount you owe if you can afford to pay a little more. You have the power to influence the extent to which all this debt takes control of your life. Understand that the banks and retailers make money off the interest that you pay them when you owe them money. The longer you owe them money, the more interest you pay. Therefore, it is in your best interests (wink!) to get rid of debt as quickly as possible by overpaying on all your repayments.
SEE ALSO: What it takes to get out of debt
3. Choose your debt-beating method. There are two main approaches to paying off debt. The first is the snowball method. In this method, you identify the line of credit with the smallest amount owing, and pay extra into that account until it is paid back. Then tackle the next smallest amount for extra repayments, until you work your way through all your debts. This is the best method because each time you pay off a debt, it will give you a psychological boost and motivate you to move on to the next one.
Look at how you can cut your expenses. Of course, all this extra money for paying off debt has to come from somewhere, so you are going to have to make some lifestyle adjustments if you are serious about the process. Plan to hibernate until at least Easter, and spend money only on the necessities like your bond or rent, transport and crucial household necessities such as food.
SEE ALSO: Battling with debt? Here’s how you can manage it better
5. Tell your friends and family! There’s nothing to be ashamed of when you are doing what needs to be done to get rid of debt. Plan cost-free socialising like picnics in the park, at-home movie nights or pot-luck dinners so that you can still see people. And, if you are supporting family members, let them know that they will also have to cut back – within reason – until you have resolved your debt. The sooner you’ve paid back your debts, the more money there will be to go around in future.
6. Now tackle your car and home loans. Car finance and home loans fall into a different category because they are funding large and necessary assets. But even though they are so-called “good” debts, there’s no reason you should accept the minimum repayments on these either. Once you’ve gotten into the habit of killing debt off quickly, start paying extra into your car or home loan – even paying a small amount extra every month can take months, or even years, off your repayment term, and save you thousands of rands worth of interest.
