Avoiding the debt trap

We all use credit to satisfy our needs. Few have the means to buy property or vehicles for cash and only the truly naive believe that saving up to buy any of these for cash is achievable. After all, inflation just keeps moving the goalposts further and further out of reach. Easy credit, however, causes people to finance their wants in addition to their needs – resulting in an uncontrollable debt spiral.

Getting out of debt
How then can you end the spiral and get back on track? You need to face facts and take a deep, hard look at yourself. Whose fault is it that you are drowning in debt? Your own. Who is responsible for repaying all this debt? You. Who needs to change so that this doesn't happen again in the future? You. Good! Now that we've discovered that, let's look at who you are and what that says about you.

Are you living on a monthly budget?
If you aren't using one your life is out of control. Implementing a budget will give you back control of your life.

How important is it for you to be seen in an upmarket sedan?
Do you drive the best because you can actually afford it, or because it gives you a sense of superiority? If the reason is poor self image, then get out there and embrace your fear!

Do you live for today because tomorrow might not come?
If your answer is yes, isn't it possible that deep down inside you have responsibility issues? By all means ignore saving for retirement, but how will it feel when at 65 you're begging at the traffic light for supper?

Do you go on a shopping spree simply to feel better?
I'm guilty of this too. My weakness is books. Now books are a great thing, but not so great when you never get around to reading any of them! My solution: I ask myself whether I really need this book – after all, I haven’t the time to read the others. Believe me it works.

Draw up a plan to get rid of all unnecessary expenditure
When last did you monitor what you spent your money on? Do you collect receipts for all those daily expenses? Here's a tip: invest in a scanner. Open a folder on your desktop for the week. At the end of each day scan your receipts into this folder. At the end of each week move that folder into another for the relevant month. At the end of each month move that folder into the relevant year.

Identify your major areas of waste
Now that you know where your money is going, look for areas where you can cut back on your spending. Do you eat out more than once a month? Why not cut down and spend that extra R200 servicing your credit card debt?

Once you understand your spending patterns you will be ready to gain control of your financial situation and manage your debt. Start by paying off your shortest term debt first. When you've settled that account push the money saved from that account into your next biggest debt and so on until you are eventually free of debt.