This list is not only applicable to those of you who are in financial trouble due to debt, but remains relevant to everyone who has any sort of debt. The list is designed to help you better understand and manage your finances to assist in achieving the debt free utopia that we all crave for. The banks and other lenders hate lists like this, as its cash out of their pockets to have debt free customers.
1) Know the numbers. It helps to make a single list of all of your debt. Items to include on your list: name of the debt, bank or lender, amount owed, interest rate, interest amount paid monthly, the number of months left on the loan term. By having this list, it helps to visualise the size of the problem and help you realise how much money is being spent on interest.
2) Draw up a budget. Similar to the item above, it helps to understand what your money is being spent on. So draw up a list of all of your incomes and list all of expenses. Include items like entertainment, food, petrol, insurance, medical aid, etc. By doing this, you will have a better understanding of how much money you have left every month to pay off your debt effectively.
3) Establish a payment plan. Ideally, you’d want to put a plan in place that accelerates the settlement of all of your debt, but that is not always possible. If you do have some cash flexibility, there are 2 potential recommended approaches to consider as part of your payment plan.
a. Pay off the smallest debt 1st. This method allows you to close accounts and rid yourself of debit order fees, & other costs associated to having multiple accounts. The idea is that you pay off the smallest debt first and whatever payments you were making toward that debt, when it is paid off, is now freed up to allow you to contribute that toward the next biggest debt.
b. Pay off the debt with highest interest rate 1st. This helps counter the negative effect of interest and reduces the long term effect that your highest interest bearing debt will have.
4) Speak up. If you find that you are in financial trouble and that you are struggling to honor your payments toward all of your debt, try calling each of your lenders. Explain the situation to them and find out if they are willing to negotiate a more suitable payment plan. It’s more likely that you’d get the help that you need, because it’s a lot cheaper for your lenders to help out than to follow the legal route for collecting that debt otherwise.
5) Get help. If after you’ve tried to resolve the issue on your own and you’re still struggling, get help. Consider debt counselling as a proactive approach to resolving your issue. Debt counsellors are professionals that assist in putting together a payment plan and will negotiate on your behalf with your lenders for a revised and better suited payment plan. Make sure that you use an accredited and reputable debt counsellor. A good place to find debt management assistance is by using an online comparative service. They are able to find the best deal that is suited to your individual needs
[In collaboration with Hippo]