Part 2: Dump your debt

This is the second in a seven-part series on how South Africans can survive a tough economy and build wealth in the face of inflation and price increases. Read other articles in the series here.

There’s very few things that most people want to get rid of quite like their debt. Well, except perhaps those extra few kilo’s that you put on over the December holidays but even that weight is not quite as heavy as the stress of unpaid bills on you and your family.

Sounds familiar? Sadly, you’re not alone. Latest stats show that 42% of credit-active consumers (that’s 9.87 million South Africans) who have taken out a loan of some sort to buy food, clothes, cars and the like, have impaired credit records. That means they’ve missed one or more payments. More than 2 million people have already had their debt handed over or written off.

Our goal? We want to help you before your debt spirals out of control and causes even more problems for you at home. The question to answer then is, if you’re indebted and not sure what to do, what are your options?

1. You can pay the amount you’re obliged to every monthThis is the basic strategy, right? Whoever you’ve borrowed money from needs to be repaid and there is a minimum amount you should be paying them – on time – every month. So do it. But at the very least please phone everyone you owe money to and find out these two things: 1) what’s your total outstanding balance 2) when will you be finished paying this creditor. This is very important information for you to know if you want to be in control of your money – and not the other way round. And if for whatever reason they can’t tell you the answer to these questions that’s a big problem and you need to make it a priority to get to the bottom of it and find out those answers. It’s something we discuss in detail in our Financial Independence Short Course because it’s so super-duper important.

2. You can speed up your repayments using this cool toolWhen it comes to managing your money better, most experts are all about creating quick wins for financially stressed consumers.

“I’ve had students argue with me about the math regarding which debt they should be tackling first – for example higher interest debt – and all the while their debt is growing and they’re doing nothing about it except talking,” says Gary Kayle, a Money Coach™ at The Money School. However, he says that in his experience the single biggest item that can change things around for people in financial trouble, is getting a quick win. And typically that means paying one creditor as quickly as possible. That’s why he recommends people become familiar with a tool called the ‘snowball method’. 

What’s important? Getting started. Make that first payment and get that snowball rolling.

Watch this video to see how the snowball method works, or make sure you sign up to do the Financial Independence Short Course to watch Gary explaining it step-by-step.

3. You can get professional helpThere comes a point – often when your debt repayments are close to 75% of your income (or perhaps even higher) where you realise that no amount of snowballing is going to help your situation and that you’re going to need help as you basically can’t get through the month and often, no one else is prepared to lend more money to you either.

We know that at this point things can get pretty rough and it’s hard to know who to trust when your back is up against the wall. The good news is that we spent a lot of time finding a service provider that we’d trust to handle the financial affairs of our closest friends and family should they find themselves in this situation and these guys are good. In the next article in this series we’re going to unpack exactly what professional help in this context – from a debt counsellor - should look like and how the process works. We’ll also talk you through who we recommend you use should you require assistance and how you can do all this through Truth About Money.

Why are South Africans struggling so much with debt? We’ve mentioned the Financial Independence Short Course twice in this article. And yes, we might be biased because we spent a long time here at The Money School creating this course, but we really think it’ll change your life if you go ahead and do it. So if you’d like to do this course you can walk into your local Boston City Campus and pay R2,497 for it. Alternatively, you can do it for FREE if you apply on Truth About Money and motivate why you need a financial education today: www.truthaboutmoney.co.za.

The views and opinions expressed in this article are those of the authors and do not necessarily represent or reflect the views of 1Life or its employees.