Debt is not always a bad thing, but when it gets out of control, it can be very destructive. Sometimes debt can creep up on you over the years, and sometimes it can grow quickly when you are faced with an unexpected but unavoidable expense. Whatever the case, there are ways to get out of the desperate debt spiral.
To help South African women get out of debt, we have partnered with Old Mutual, whose free financial wellness guide is aimed at helping people achieve financial freedom and security. Here we bring you some insights from the downloadable eBook.
Cut down on non-essential expenses
Eating out, take away coffee, your gym membership are all nice-to-haves, but if you’re serious about getting rid of your debt, you will have to cut down on luxuries. This won’t last forever. Once you’re out of debt, you can start enjoying your little pleasures again. But for now, start by evaluating what is really essential and what isn’t – you really don’t need a new pair of shoes just because they’re on sale. Rather put the money you would have spent on a non-essential purchase straight into one of your debts.
Create a budget & stick to it
Once you have a list of all essential expenses, put them into one of five categories – rent, debit orders, groceries, transport, and utilities. Your rent and debit orders should be the same every month, but you should track spending on the three other categories to ensure that you don’t overspend. Once you start to cut costs, you’ll be surprised by how far you can stretch your budget. The most important part is that you stick to it.
Consider restructuring or consolidating your debt
If you are heavily in debt, you may struggle to make repayments – but there are options to make this easier: consolidating your debt with a debt consolidation loan or asking your lender if you can lengthen the term of your debt. This will reduce monthly instalments, making it easier to make repayments. In some cases, a debt consolidation loan can even lower the cost of debt by replacing several smaller debts and with a single loan – and single admin fee (instead of several). A single loan can also be more manageable than several loans and help you get your head around your debt.
Create an emergency fund
An emergency fund is important to your debt-free journey. If you don’t have this rainy day fund when you need it, you’ll have to rely on a loan in those unexpected emergencies – burst geysers, vehicle repairs and sick kids. The size of an emergency fund depends on several things, including the number of dependents in your care, the condition and value of your car, and the limits of your medical aid. The easiest way to start an emergency fund is to create a list of things that could go wrong and then budget for the most expensive of these.
Get the free financial wellness eBook
In their free guide to financial success, Old Mutual explains how to overcome your debt and use compound interest and other tactics to save your way to financial freedom and security. Take the first step to turning your finances around by downloading the eBook now.
Old Mutual loan offerings are made available through Old Mutual Finance (RF) (Pty) Ltd, a Licensed Financial Services and Registered Credit Provider (NCRCP35).
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