The new year brings about fresh starts and new goals. 2019 is done and dusted and we can all look forward to a new chapter. Debt repayment may be on the top of your resolutions list. Unfortunately for most South Africans, 2019 was a tough one. Government instability, rising unemployment, increasing living costs and economic slowdown were a few of the issues thrown our way.
Look at your personal budget early
It’s too late to budget for February in February. You should be planning ahead when it comes to spending. The most important aspect when it comes to budgeting is the review after the period ends.
Once January is over you need to do a thorough recap. Investigate where you overspent and adjust the budget accordingly. You don’t want to make the same mistakes twice.
Be sure to account for all living expenses in your budget. It is often easier to break them down into two sections – fixed and variable. The variable expenses and luxuries are the one’s to look out for.
Focus on paying all your debts
It’s important to keep up to date with all repayments. However, if you intend of using debt to pay off other debt, think again. Borrowing from Peter to pay Paul is only fooling yourself.
To preserve a good credit score, you need to stay up to date with all debt repayments and make sure any arrears are caught up. If you have any default notices or judgments on your profile you should focus on settling those to get them removed.
If you have excess funds, try to pay a bit extra to your more expensive debts. Payday loans, personal loans and credit cards have high interest rates (20%-60%) and will cost you a lot of money. Paying these earlier will save you in interest and fees.
If repayments are high, consolidate…
If you find that your debt repayments are too high, try look at consolidation options. There are two main debt consolidation options available to consumers.
- A consolidation loan – which is a large personal loan that is used to settle smaller debts and be left with just one installment and one loan. Consolidations loans are effective but have strict qualification criteria due to their size. Consumers should be up to date with all payments and have a high credit score to qualify.
- Debt counselling – a solution where a debt counsellor would formally negotiate with your creditors. Monthly installments are consolidated into one, lower monthly debt repayment. Interest rates are also reduced making the debt more affordable to repay. Consumers can be in arrears and have a low credit score.