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In the '80s a wad of credit cards in your wallet was a thing to envy but today, we are a little smarter. We have become painfully aware that the more credit we have, the less sleep we get.
Back in the day, if someone in the neighbourhood had their car repossessed, it was the number one gossip topic at dinner. Now it is so commonplace that we just commiserate and continue talking about the price of eggs.
Unfortunately, if we hope to own big-ticket items like a home or a car, we usually need to borrow money. In a way, therefore debt is a necessary condition. However, it is quite another thing to become stuck in a never-ending cycle of monthly payments –while it is important to budget to make sure you live within your means, it is even more important to budget to get out of debt.
Unless you have the debt of a small African country it is absolutely possible to get out of that debt trap. The great news is that 50% of the battle is deciding that you want to do so.
So here is what you do:
• Choose an evening when you are alone and have no pressing commitments. Put on some soothing music, make some nerve-calming herbal tea, and pull out all your bills. Sort them in the order of the smallest monthly payment to the biggest.
• Now get some paper and draw four columns. List all your monthly interest-bearing payments from smallest to biggest. List the monthly payments, the total outstanding balance and time left to pay them off.
Many people almost choke on their Marie biscuits when they do this exercise for the first time. The first shocker is seeing the monthly payments they fork out each month; the second is seeing the total amount of debt. This shock is not necessarily a bad thing. Sometimes we need to get up close and personal with the unsavoury aspects of our lives in order to take action.
Once you have recovered, you can take steps to fix the situation.
1.Set up a meeting with friends and family, and tell them you are going on a savings spree. You will need their moral support.
2.Go through your budget in detail to see where you can free up cash to start settling debt. The excuse that you have no slack in your budget is open to challenge. If you own a cell phone, eat fast food, go out with friends, and/or have clothing accounts, you have scope for saving. If you can come up with just R200 a month, you will be surprised at how quickly even that small amount makes a difference.
3.Choose the smallest debt you have and redirect cash to pay it off. Once that is settled, hit the next biggest one.
This is called the snowball effect. You will be amazed how quickly you can settle short term debt with this method.
What do you think of the snowball effect? Have you used this method before? Did it work? Tell us in the box below.
Back in the day, if someone in the neighbourhood had their car repossessed, it was the number one gossip topic at dinner. Now it is so commonplace that we just commiserate and continue talking about the price of eggs.
Unfortunately, if we hope to own big-ticket items like a home or a car, we usually need to borrow money. In a way, therefore debt is a necessary condition. However, it is quite another thing to become stuck in a never-ending cycle of monthly payments –while it is important to budget to make sure you live within your means, it is even more important to budget to get out of debt.
Unless you have the debt of a small African country it is absolutely possible to get out of that debt trap. The great news is that 50% of the battle is deciding that you want to do so.
So here is what you do:
• Choose an evening when you are alone and have no pressing commitments. Put on some soothing music, make some nerve-calming herbal tea, and pull out all your bills. Sort them in the order of the smallest monthly payment to the biggest.
• Now get some paper and draw four columns. List all your monthly interest-bearing payments from smallest to biggest. List the monthly payments, the total outstanding balance and time left to pay them off.
Many people almost choke on their Marie biscuits when they do this exercise for the first time. The first shocker is seeing the monthly payments they fork out each month; the second is seeing the total amount of debt. This shock is not necessarily a bad thing. Sometimes we need to get up close and personal with the unsavoury aspects of our lives in order to take action.
Once you have recovered, you can take steps to fix the situation.
1.Set up a meeting with friends and family, and tell them you are going on a savings spree. You will need their moral support.
2.Go through your budget in detail to see where you can free up cash to start settling debt. The excuse that you have no slack in your budget is open to challenge. If you own a cell phone, eat fast food, go out with friends, and/or have clothing accounts, you have scope for saving. If you can come up with just R200 a month, you will be surprised at how quickly even that small amount makes a difference.
3.Choose the smallest debt you have and redirect cash to pay it off. Once that is settled, hit the next biggest one.
This is called the snowball effect. You will be amazed how quickly you can settle short term debt with this method.
What do you think of the snowball effect? Have you used this method before? Did it work? Tell us in the box below.
