How to Get Out of Debt

Overview

Research has shown that at least 76% of household spending in South Africa goes towards servicing debt. Even more worrying is the fact that more South Africans are struggling to keep up with their debt payments. There are various ways that people can get out of debt.

Over-indebtedness can be a result of overspending or even a life-altering experience like losing a job or getting into an accident. The path to financial freedom is never easy, but there are a few simple steps you can take to get out of debt:

Stop using debt to fund your lifestyle

You can start by developing a plan to pay your debt off. You need to be strict with yourself and make sure that you stick to the plan. Avoid relying on credit cards to pay for everything you buy. Rather opt for using cash and you’ll notice how this keeps you in check.

Create an emergency fund

Do your best to create a buffer between you and debt. Don’t borrow using credit cards and you’ll avoid falling further into the debt trap. Create an emergency fund, so that you can rely on it when unexpected expenses arise.

Create a realistic budget

Set out clearly what your income and expenses are and how much you can afford to allocate towards repaying debt every month. The trick to creating a budget is knowing how to stick to it. Make sure that you track your income and expenses.

Organise your debt

You can map out a plan to pay your debt off. Start by listing your debts from highest interest rate to the lowest. Establish a clear system for paying the debt off.

Use any extra cash you have towards paying off debt

If you have any extra cash during the month, instead of spending it on luxury items, do yourself a favour by using to pay your debt off.