If you find yourself relying on debt and not your income to survive every month, it is a sign that you need to evaluate your finances to get financial stability.
Eunice Sibiya, Head of Consumer Education at FNB says “it may seem hard at the beginning to make changes to your daily routines, but looking at the end goal is encouraging. Therefore, you should carefully re-evaluate your budget and prioritise paying off debt as quickly as possible.”
Sibiya recommends the following measures:
1. Change the behavior that caused debt problems
The first step of getting out of debt is looking at what got you into debt. Acknowledge the challenge and evaluate your spending pattern as well as your lifestyle. Once you have done this, cut down on unnecessary expenses and channel the money towards paying debt.
2. List all your debts
List all the creditors you owe, the amount owed and the interest of each debt. Then prioritise your debt either by interest rate or the balance of each debt. In addition, decide how much you can afford to pay a month for each debt. Be realistic about what you can afford and stick to your budget in order to avoid defaulting on any payment.
“Consider paying a lump sum to one of your debts while still servicing other debts. Once you have paid off one account, channel the money into servicing the other debts so that you can pay it off as quickly as possible,” says Sibiya.
3. Set periodic goals
Now that you have listed all your debts and have a plan on how you will be paying them off, set a time frame and work towards achieving your goal within the set time.
“This will require commitment and discipline from start to finish. The desired goal will be rewarding at the end of the hurdle,” says Sibiya.
4. Track your progress
Track your progress every three months. This will allow you to relook your payment plans to see if it is working or not. If the progress is positive, you will be encouraged and driven to look at the long term benefit of being disciplined and committed to a debt free life.
“During this challenging journey, avoid taking more debt until you have paid of all your dues. Discipline and commitment will lead you to financial independence,” concludes Sibiya.