How to Get Out of Debt
How to Get Out of Debt guide. Approximately 75 per cent of South Africans' take-home pay goes to paying off their debt, according to a report by Business Tech. I don't know if you can imagine that there can be anything more frustrating than watching your paycheck disappear faster than you can earn it. Anxiety about feeling like you are at the helm of a ship headed for disaster.
There is nothing more aggravating than being hit in the gut every time your account payment due date rolls around. Your calendar seems cluttered with only payment dates rather than holiday dates. Regardless of what you do or where you go, it feels as if your finances won't ever be stable.
You probably would like to know how to get out of debt if this scenario seems too familiar. Fortunately for you, we're about to tell you exactly how you can pay off your debt and reclaim your financial freedom. Just keep reading to find out exactly how you can do it.
Here's Why You Should Reduce Your Debts ASAP
Experts in personal finance have a reputation for telling consumers that they need to start paying off their debts as fast as possible. However, is it the best plan for the future to rush to become debt-free as soon as possible? The following are three reasons why South Africans need to confront their debts head-on:
1. To Pursue More Fulfilling Career Options
Approximately 47 per cent of South African professionals in a 2019 survey stated that they were applying for new jobs in the hope of leaving their current employers. In the ideal world, most people would like to be able to move on from their current positions with an offer in hand. However, what happens if that isn't possible?
The Old Mutual Savings and Investment Monitor's 2021 report might provide further insight into this situation. According to the numbers, a high proportion of people surveyed didn't have enough savings to make it through a month without a job or without the support of their family members.
So, here's the bottom line:
When you are spending most of your monthly income on debt and expenses, you cannot always be true to your heart when it comes to your job. You will be able to choose what type of work environment you would like to work in once you have paid off your debts and have a substantial nest egg in the bank.
2. To Lower Stress Levels
The problem with debt is that it acts as the main villain in a horror movie. One day, you find yourself living the life of your dreams and happily purchasing items on credit. The next thing you know, your credit card debt is out of control, and you are up all hours of the night worrying about it.
The National Treasury reported that 56 per cent of respondents in South Africa described their financial stress as "high and overwhelming" in 2021. There is no doubt that there would be a significant reduction in their stress levels associated with money issues if any of those individuals could wake up tomorrow debt-free.
3. To Pursue Future Plans
The ability to pay off your debts indefinitely is fantastic provided you have a steady income stream. However, imagine you are retired, and your income stops coming in. What then? As reported by 10X Investments in their South African Retirement Reality Report for 2020, the results were not encouraging:
The survey found that 49 per cent of respondents did not have a retirement plan. Only thirty per cent of respondents were able to state they "felt confident" about their retirement strategy. Just six per cent of those surveyed believed that they would be able to retire comfortably in the future.
Even though debt payments may seem like a small matter, you cannot underestimate the toll that debt payments will have on your savings. Consider what it would be like if you could contribute 10 per cent or 15 per cent more to your pension each month. Once you have reached retirement age, these benefits will amount to more than you contributed.
This is How to Get Out of Debt!
Okay. You have been reading along so far and nodding your head as you go.
Stress has no place in your life. What you want is more mobility in your professional life. Moreover, one of the most significant factors is that you want your retirement years to be the most enjoyable of your life.
What are the steps you need to take to get out of debt? Here is a step-by-step guide that will help answer any questions you need to have answered.
1. Calculate How Much You Owe.
A general estimate is certainly not going to suffice when it comes to managing debt, and that is why you should only rely on specific figures. It is not difficult to guess how many cups of coffee your office consumes every morning. It is also not difficult to determine how many snacks you munched on last week.
On the other hand, if you want to talk about how much money you owe your creditors, make sure the numbers are specific. In addition to that, once you've tallied everything up, the investigation can't end there.
For example, do you have any debts with high-interest rates? And if you do, do you have multiple revolving credit lines? Do you have any obligations that are subject to strict repayment schedules? If you were to take on a complicated project at work, you wouldn't do so without understanding how you would approach it first. Otherwise, you may find that you are wasting your company's time by overestimating the work. The overestimation of a project can lead to subpar deliverables, resulting in a furious boss when things don't go as planned. Making regular payments is often the key to getting out of debt. Make sure you execute your strategy carefully using a metaphorical and literal approach and be sure you have a firm grasp of the situation.
2. Create a Debt Repayment Plan.
This takes you to a point where you have the numbers in front of you, and you are ready to go. You even have a spreadsheet that allows you to dive right into the numbers with just one click. So now, the million-Rand question is: How do you do it? Are you more of a fan of snowballs or avalanches? If you go skiing, you're going to prefer snowballs — and it's not even close. However, when you are working towards getting out of debt, the "right" decision might not be as clear-cut as one might think.
When you use the snowball method, you first start with the smallest debt and then work your way up to the highest balance you owe. If you do it this way, you will "snowball" your debt repayments until you have paid off every one of them. By following the avalanche strategy, you can also focus your efforts on one debt at a time. However, instead of focusing on the totals, you'll concentrate on the debts with the highest interest rate. Choosing the snowball method will enable you to achieve a lot of quick wins. However, by using the avalanche strategy, you will be able to save more money on interest over the long term.
The two methods are both well-established. It is a safe bet that both strategies will work. Choosing a technique that you can stick with is crucial.
3. Look for Ways to Cut Costs.
Often, this is the point where many debt repayment plans veer off the rails. It is possible to take steps on your journey to financial freedom that include calculating costs and picking a debt repayment strategy - but all of that is theoretical. From this point forward, things are about to become a reality. In the same way, as an exhausted soccer team pushes its limits in a championship game, you will have to evaluate your budget and figure out how to find more money to pay off your debts.
It may have become a long-standing habit in your life to eat out with your friends after work for years. It could also be that you tend to make one-off purchases without tracking what you are spending. You will find plenty of ways to reduce your monthly costs if you do not leave any stone unturned. It is imperative to keep in mind that you don't want to take your cost-saving measures too far. Stanford University's marshmallow experiment from the 1970s did more than merely reveal that children like to get their treats as soon as they can. In addition, the study indicated that not thinking about immediate rewards is often a crucial ingredient for delaying gratification for many people.
While everyone wants to know how to get out of debt quickly, becoming debt-free is a goal you must strive towards if you wish to eliminate your debt. The next time you are looking for ways to reduce your budget, you should look for cost-saving measures that don't feel like significant sacrifices when you are working through your budget. There is a noticeable difference between buying generic goods instead of designer items or eating veggie-heavy lunches instead of meat-filled ones.
4. Make More Money.
A strategy to get rid of debt does not have to involve scraping by and living below or within your means to pay it off. Getting from your debt problem to a debt-free situation is expedited by making more money.
As we mentioned in one of our articles, we describe how blacklisted consumers can claw their way out of debt by understanding how blacklisting works. A list of money-generating ideas, including selling unused items and starting a business, was provided in the article. However, even if you are not a digital entrepreneur, you may still be able to find casual work that you can enjoy making more money.
Working an additional eight hours at the weekend or taking on a few extra overtime hours might not have a significant impact right away on your bottom line. However, you have managed to take a considerable chunk out of your debt over the past year.
You might want to give it some thought.
5. Create a Long-Term Financial Plan.
Most debt problems fall into one of two categories:
- Problems with spending
- Money and problems with earning money
You should take steps to address the root cause of your debt problem as soon as possible. No matter the circumstances that lead you to search phrases like "How to get out of debt fast" Why? It is highly likely that you will find yourself in the same situation if you do not take the time to reflect on your finances and establish new rules going forward.
Consider your retirement plans and create a budget that is sustainable. After the debts have been settled in full, you will have the skills and knowledge necessary to achieve the financial goals you have set for yourself in record time.
Still Not Sure How to Get Out of Debt?
Our discussion on reducing debt may have just covered the basics. Nevertheless, sometimes a guide that tells you how to get out of debt is not enough.
It is something that we fully understand and appreciate.
There is no need to feel alone in your situation if you cannot repay your debts. By using our debt counselling services, you will be able to convince your creditors to accept less than what you owe them.
What do you say? Does that sound reasonable to you? Let us reduce your debt as soon as possible. For more information about our debt counselling services, please click the link below. You may also contact us and ask about our credit clearance and debt review cancellation services.
