You just needed a little bit of extra cash to get you to the end of the month, so you approached your bank for a loan, found out you qualified for a lot more than you needed and you took it. You saw a pair of shoes you just couldn’t live without, so you opened a line of store credit at your local retailer, thinking ‘I will manage this, I do not often find items to buy here’. And you have been buying your groceries on credit for a couple of months now – things are so tight, especially around this time of year. These are all examples of how your expenses can soon increase to beyond what you are earning, leaving you in debt up to your ears with monthly repayments that are approaching unmanageable. You know you are sinking, but month after month goes by, the debt mounts up and you just keep on spending.
If this is your story, now’s the time to act. Here are the six most common reasons you cannot get out of debt. We offer you some practical advice to help you change the way you think and take that step towards a debt-free future.
When you look at your monthly expenses, it’s hard to work out where you can make savings to pay back your debt. Everything you do and buy seems essential to your happiness and survival. But you’re stuck in the debt cycle: not managing to pay it back and getting further into debt every month. You have to do something, because debt isn’t going to pay itself back.
Get real: Remember that there’s no such thing as free money and now’s the time to pay for what you’ve already spent. Set yourself a cost-cutting goal and then look at your budget to identify ways to cut back – don’t give yourself a way out.
You believe you are judged on what you own. You want respect at work? You’d better arrive in a nice car. You want to charm the opposite sex? They’ll only give you a second glance if you’re wearing the right clothes. You need to work out at the gym? You won’t be able to hold your head up high if you walk through those sliding doors in shabby trainers. Nonsense! None of this reflects well on you if you’re going into debt to afford it.
Get real: Accept that the most important measure of a person is what they do, not what they own. If the people around you judge you for your cheap takkies or sensible car, then find new friends. You can hold your head high knowing that you are getting your financial situation under control.
There’s all this debt weighing down on you, but to be perfectly honest, you don’t know how to get it off your back. You pay the minimum instalments every month, but the great credit hole doesn’t seem to be getting any shallower.
Get real: Track your income and expenditure and do a budget, taking into account everything you spend your money on. Then look for places where you can cut costs and allocate those savings to paying extra into one of your debts each month. You can use the avalanche or the snowball method to pay off your debt, or speak to a service consultant at your bank about consolidating your debt. Then whatever you do, don’t spend on credit any more – and cut up those cards!
Your family make endless demands on you, your friends rely on you to show them a good time and the people you live with expect you to pony up for your share of the household expenses, even when those expenses are costly food or a new lounge suite you don’t really need.
Get real: Just like losing weight, you can’t beat debt without the support of those around you. Let everyone know you’re on a debt-busting mission, ask them for their help in cutting costs and let them know that your pockets aren’t as deep as they once were. If they’re your family, involve them in your cost-saving plan. The people who care about you should help to keep you on the straight and narrow.
Dinner parties for 12? Nights out at the best restaurant in town? A fancy car, a beautiful home and the finest clothes that money can buy? If this is your lifestyle, but you can’t afford it, know that it’s just sinking you further and further into debt.
Get real: Take a long, hard look at your expenses and work out where you can start cutting back. Getting rid of one expense or activity a month is a good way to cut down on your expenses and still keep up with the Joneses. If that doesn’t work, you may have to look at taking more drastic measures, downsizing your home, trading in your car and reducing your grocery bill substantially. Speak to a financial planner to help you to structure your lifestyle so that you can afford it.
You know what you have to do and you know how to do it but the idea of taking that first step just fills you with dread. But, just like with that new gym membership, you just need to get started! Budgeting and saving can’t be that bad right?
Get real: Every month, your debt is costing you money. Do a budget and draw up a plan tonight or give yourself 48 hours if you really must. And then put your plan into action the very next day.
Take a moment to understand why you have not dealt with your debt and make a promise to change your behaviour and start paying off what you owe. No matter how much you owe, you can be debt free one day, you just have to take that first step.