Get out of debt!

Gary Olfsen, financial and debt strategist, and author of Debt-Free Strategies: How to Get Out and Stay Out of Debt (The Cutting Edge), has helped many people get out of debt and get to grips with both large and small amounts. He too used to be in debt, but he managed to work off a large personal debt within a few months. He is convinced that you don't have to be a financial expert to get out of debt, but there are two essential requirements, according to Gary.

'The right attitude is important. Plus you must have a plan and stick to it. All too often people panic and start trying to plug the gaps left, right and centre when the debt starts to grow, but without success.' Here is Gary's advice for getting – and staying – out of debt:

Now is the time to do something about it in order to avoid the debt trap.

1. Don't ignore the problem.
Even if you are only R500 short every month, alarm bells should be ringing. It may not sound like much, but if it accumulates you could soon find yourself having to incur more debt to pay off your debt. Do something about it right away. If you and your partner want to tackle the problem together, you must both be committed to the process.

2. Don't incur more debt.
Close the accounts that are a source of temptation and work on reducing the debt that you already have.

3. Set yourself a deadline.
This will keep you focused and give you hope because you will be able to measure your progress.

4. Draw up a budget so that you know exactly where you stand.
First list your income. (If you earn commission, work on an average amount that you are fairly certain of earning.) Then list all your expenses: fixed expenses like your bond, car instalments and food, as well as your variable, or non-essential expenses such as entertainment, petrol, and so on. Deduct your expenses from your income and write down this figure.

5. Make a third list, of your debt.
On this list you should put all debt with the exception of your home loan and car repayments. You can deal with these once you've paid off your other debt. Write everything down: how much you owe, who your creditors are, and how much they want from you every month. This can be anything that you need to pay off in order to balance your budget, from clothing accounts to credit-card debt. Arrange these from the smallest to the biggest amount.

6. Start making changes.
If, when you deduct your expenses from your income, the amount you're left with is not enough to cover your monthly debt (according to the list you made in step 5), take another look at your finances. What about your list of non-essential expenses? Where can you cut back? Could you save money by not buying unnecessary luxuries? Are there any contracts like garden services that you could possibly cancel? This is where even the best-laid plans can go wrong. Perhaps you're not prepared to do without certain non-essentials, and that's where your attitude plays a role. The success of your plan depends on how serious you are about getting out of debt. Ultimately, it's up to you.

7. Make a plan to pay off your list of debt.
Suppose you have four accounts you've run up at four different shops or suppliers. Negotiate with them to pay off a certain amount every month (as described in step 8). Try to pay off the shop to which you owe the smallest amount first. It's always encouraging to see how you're making progress. Stick to your plan to pay them all off systematically. If you receive money unexpectedly or get an increase, pay off the smallest debt completely and then focus on the next one, and so on.

8. Negotiate with your creditors.
It can be intimidating if they pressurise you, but don't lose your focus. Make sure you have a realistic plan when you approach them, and don't make any rash promises. Think about what you want to say beforehand. Agree on a monthly repayment amount. If you can afford only R300 of the R600 required every month, say so. You'll be amazed how many creditors will be willing to accommodate you. If you don't feel able to handle the negotiations, get an expert to do it for you. Afterwards, remember that you now have a new contract with your creditors. Keep your promises. If you don't, you'll lose all credibility and could end up being sued.

9. Try to earn extra income.
Every bit helps when it comes to balancing your budget. Perhaps you could increase your income by asking for a raise, or maybe your garage is filled with unwanted items that you could sell. You must be realistic though – a salary increase may be impossible, or you may not have enough time to earn extra money. Whatever you do, avoid 'instant' solutions. Don't get involved in get-rich-quick schemes. Also avoid organisations or people promising to pay off your debt on your behalf – you'll basically be incurring more debt to pay off your debt. Stick to your systematic repayment plan. Be patient. You'll reach your deadline and achieve your goal sooner than you think.

10. Once you've paid off your debt, stay out of debt:

Don't spend what you don't have. Live within your means.

Don't give in to the desire for instant gratification. If you want something but you can't afford it immediately, forget about it.

Don't try and keep up with the Joneses. (They may be even deeper in debt than you are.)

If you receive money, use it to pay off debt.

Don't stand surety for other people.

Stick to your budget and make sure that it balances.

Don't make impulse purchases or sign any new service contracts without carefully considering the consequences. (And make sure that you have a thorough understanding of any contracts that you do sign.)