Are you ruled by debt? Here are quick tips to manage your finances

06 March 2018 - 10:17 By EvenMe
Troubled man sitting on the couch calculating home bill finance debt in his living room.
Troubled man sitting on the couch calculating home bill finance debt in his living room.
Image: warrengoldswain/

So you bought the car, moved out of your parents’ home, kitted out your new place and now you’re thinking, ‘ Gees, how do I pay for all of this, what was I thinking!’ Or maybe you’ve just had some bad luck and things didn’t go quite as planned. Whatever the reason, it’s important to get help quickly so you don’t dig yourself deeper into a hole.

Step 1: Create a budget and figure out what it is you can’t afford

Young people should be forced to create an initial budget before they leave school, it is one of the most important things you do in life. With a budget, you can work out what you can afford, prioritise your expenses and it even helps you save money.

Start off by writing down what you earn and then subtract your expenses based on importance. For example, you have to pay your rent otherwise you will be kicked out, you will need petrol to get to work, food to eat, take care of the electricity and water bill etc

Now you can see what you can’t afford. Maybe it’s the car, even the flat you’ve moved into, or just some items that you can return or sell. Make the right decision to get yourself out of debt. You will always be able to buy another car and get another place of your own, but it’s important to fix the problem now.

Step 2: Don’t be quick to borrow to money to pay for what you can’t afford

Your pride may get in the way and you will be inclined to borrow money to pay off your debt. This is not a good idea because you couldn’t afford the debt in the first place and now you’re going to add to your debt. You’re digging a deeper hole. Rather sell or return items you’ve bought, move back in with your parents or a friend for a few months and even sell your car and take the bus. Wipe your debt slate clean and start again.

Step 3: Cut up your credit card

If you can’t stop yourself from charging things to your credit card, then cut it up. Take the temptation away and you won’t have to struggle every time you go out partying or step into a shop.

Step 4: Renegotiate payments

If it’s something you can’t get out of, for example school fees, accounts you can’t return items on, loans you already have, insurance and policies and even rent if you can’t stay with someone else, renegotiate your payment terms.

Contact the company and honestly explain your situation and ask them to revise your payment terms. They will stretch your payment over a longer period so you have to pay less per month.

Sounds great, but it does mean that you will pay more interest because you’re taking longer to pay off your debt so don’t lose focus on clearing your debt.

Step 5: Pay off your debt with the highest interest rates first

You could be paying 20% interest on your credit card and 10% on your student loan. So, phone up your bank and renegotiate your payment terms on your student loan and then pump as much money into your credit card as possible until you’ve paid it all off. Then pay all the money you were pumping into your credit card into loan to catch up all your payments. This way you will only have paid a few months of added interest on your loan.

Step 6: But what if it’s more serious than that?

What if companies and organisations won’t give you new payment terms or perhaps you’ve left it too late? This is when the company will start legal proceedings to recover the debt from you. It starts off with a counsellor contacting you and assessing your financial situation. Once he’s established that you are over indebted, you will undergo debt counselling and he will work out new payment terms and submit these to the companies you owe money to. If they accept the terms, you will be able to pay off your debt and your name will be cleared of the ‘under review’ status you will have been in with the credit bureau. It’s only if you don’t clear your debt according to the plan the counsellor gives you that you will be blacklisted. In both cases, when you’re under review and blacklisted, you won’t be able to open more accounts or apply for loans.