There has been a lot of talk about the amendment to the National Credit Act for quite some time now and how it will affect everyone from businesses to banks to ordinary South Africans. 

The debt relief bill, as it is now known, will seek to assist those consumers who earn between R0 and R7500 a month and have "a total unsecured debt owing to credit providers of no more than R50 000," says an article on Business Tech.

These unsecured debts can include accounts at different retailers, a credit card account and or personal loans. 

This will not apply to households who owe money for rates, taxes and electricity, etc as in these instances no credit agreement was ever established. 

This bill is apparently in its final stages now. The committee is expected to conclude deliberations after Parliament's winter recess end July. 

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Now, we have all been in situations where we do not have enough money to pay for necessary expenses or buy things we need (or want). In most cases the only answer is to make debt.  

So here's a guide to help you through it:

Healthy and unhealthy debt

Debt in itself is not wrong or the problem. Very few people can buy a house, a car or even pay for studies in cash. When you make debt to increase your chances of getting a better job or secure yourself with a property, we refer to it as healthy debt.  

It becomes a problem when you miss payments or stop paying altogether. Unhealthy debt is where you make debt that you cannot afford to pay or where you continuously make debt to buy luxuries.

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Study debt

This is probably the most common healthy debt that you need to pay off when you start working. It normally takes quite long to do this if you only pay the minimum amount.

There are may other expenses you have when you start earning a salary but when you get a promotion or increase, try to also increase the payment you make on your study debt.  

Debt can be healthy, but it is still a long term commitment

When you make more healthy types of debt, make sure that you are ready for such a long term commitment of never missing a payment.

It is important for you to maintain a healthy credit record because that will influence your chances of buying a house or car later on in life. Also make sure that you borrow the money at a reasonable interest rate.

Debt is made in a short period but it takes much longer to pay it off. It is really no fun to feel that the only reason you are working, is to pay debt.

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Warnings signs of unhealthy debt

- You make debt to cover other debt.

- You do not pay the minimum that you are supposed to.

- More than 50% of your salary goes towards debt payments.

- After you have paid your monthly debt payments, there is nothing left for the rest of the month.

- The credit providers where you have debt, call you repeatedly.

- You don’t have an emergency fund.

- You don’t save on a monthly basis.

- You feel overwhelmed when you receive statements from banks or retail shops.

- You do not have a good credit record.

- Debt counselling or debt review is your only option.

If you do not have unhealthy debt, use the above warnings signs to motivate you to never creating it again.

The fact that you are not earning any money, is no excuse to stop with monthly payments on your credit cards, study debt or any other retail accounts.

Here are some general tips to avoid making unhealthy debt

 - You may be offered debt such as overdraft at a bank while you are a student. Try and say “no” as far as possible or work over holidays to pay off debt that was unavoidable.

- Shopping and buying can become an addiction. If you get depressed about not being able to shop while you have excessive debt, you might need to seek professional help.

- Try not to borrow money from family and friends. If for any reason you cannot pay it back,  it can harm relationships.

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- If you stop working for any reason (for example, you start a family or decide to study again), you need to make sure that your debt is paid off as much as possible. The fact that you are not earning any money, is no excuse to stop with monthly payments on your credit cards, study debt or any other retail accounts.

- If you want to buy something you feel you need, try and give a bigger deposit on it and pay it off in a shorter period. The monthly payment will be higher but you will save in interest.  

To avoid excessive or unhealthy debt, you have to act responsibly and use a budget. There just is no other way.

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