Solving 5 debt problems

If you’re finding it hard to get out of debt, you’re not alone. Financial planner and author of Become Your Own Financial Adviser, Warren Ingram, says debt is the biggest money problem facing South Africans – rich and poor. We asked him to solve the five main things that probably keep you in debt.

Problem 1: You’re broke before month-end and don’t know why
Here’s what to do: Really look at your spending. Work out where every Rand of your salary goes. And be honest: if you earn R8 000 but use R10 000, face up to it. Then draw up a budget and stick to it. But be realistic: if you spend R10 000 a month, don’t aim to spend R7 000 the next month, because if you try achieve too much, you’re likely to fail. Make small cuts: this month cut back by R100; then up it to R200 next month, and so on.

Problem 2: You don’t know where to begin
Here’s what to do: Start at the top. If you were to sweep a flight of steps, you’d start at the top and work your way down, right? That’s how you should look at your debts. Pay off your most expensive one first (the one with the highest interest) and work your way down to the least costly one. Pay the absolute minimum on the debts with the lower interest rates, so you can put more into the one with the highest rate. And down your debt goes, one step at a time.


Problem 3: You want things now, but can only pay later
Here’s what to do: This one’s simple... stop buying things you can’t afford. Eyeing a new TV? Remember: by the time you’ve paid it off, you’ve paid more than it’s worth (because of interest). Learn to plan ahead and calculate what you need to save to get that TV. It’s also a good idea to review your banking habits and change your lifestyle – cut back on credit cards and click here to see how you can save by having just one bank account.

Problem 4: Your debt scares you
Here’s what to do: Don’t hide from the problem. Avoiding your statements or tearing up bills won’t help. If you get a letter of demand, do something about it immediately. But know your rights – the law says no debt collector is allowed to threaten, intimidate or use force against you (the debtor). If they do, you can report them.

Problem 5: You have more debt than you earn
Here’s what to do: Work out if that’s really true. Subtract all your monthly expenses from your salary, and if it goes below zero, act immediately. Call the companies you owe and work out a way in which you can comfortably pay them back. And there’s lots more you can do to free up some cash: find a flatmate to share rent, get an extra job or find one that pays more. It’s always a good idea to get retrenchment and death cover, it’s a life saver should you lose your job. And never cut out insurance or cash in your pension, as many people tend to do

For more advice, contact the National Debt Mediation Association, on 0861 116 326.