Most South Africans do not have the luxury of saving money every month. With minimal to no salary increases over the past 2 years, saving seems like a anomaly. In South Africa, there are more people using debt to get by each month than there are people saving. Paying your debt should be the priority in your monthly budget. Your debt should be treated with urgency and the longer you leave it, the worse it is going to get.

Step 1: Understanding The Whole Picture

It is best to sit down with your credit report and look at all of the debts you owe. You can get a free credit report every year from any credit bureau. Tally your debts up and look at the total figure as well as the monthly repayments. The minimum amount you owe each month is the figure you need to focus on. This is the start of understanding your financial situation.

The debt you have right now is can only be reduced by paying it back in some form. Making no payments will result in a growing debt amount.

Step 2: Start Budgeting Properly

Are you ending up broke each month? Is more money flowing out than is coming in? If you are relying on credit cards, store cards and payday loans to make to through the month, you are probably spending more than you receive. If this is the case, you need to start a budget!

There are plenty of apps and excel programs available to help you budget. Check out 22Seven by Old Mutual. You can even create your own budget on a spreadsheet and customize it to fit your unique lifestyle.

Your budget should start with the income(s). Then a list of fixed expenses, followed by your variable expenses. Debts should form part of your fixed repayments, as the installments are monthly.

Here is a rough example of a monthly budget:

Income                                 15,000

Total Fixed Expenses       (10,750)

Rent                                           4,000

Cell Phone                                  800

School Fees                                750

Loan A                                       1,500

Loan B                                       600

Vehicle Finance                        1500

Insurance                                  500

Medical Aid                               1,000

Bank charges                            100

Total Variable Expenses    (3,800)

Water and Electricity             500

Groceries                                  1,500

Petrol                                        1,800

Debt Repayments 4000

Net Deficit/Surplus              -3550

The example above results in a negative balance of R3550 per month. This negative cashflow amount means that the above consumer is over-indebted. Over-indebted means that your income is not enough to cover all living expenses and debt repayments each month.

Step 3: Pay Your Debt First

As mentioned earlier, your debt should be a priority. Try not to short-pay or miss any debt repayments. This will have a negative effect on your credit score and will end up costing you even more money. Credit providers can charge extra fees and penalties if debt repayments are missed.

Make sure your debts go off your account as debit orders – this ensures that these are paid first. If you have missed any debt repayments you should try to repay these arrears and catch up as soon as possible to minimize the impact on your credit score.

Step 4: Focus On Cutting Costs

The BIG stuff:

Housing – Your housing cost, whether home ownership or rent, should not exceed 30% of your monthly income. If it does, you may want to consider downscaling, but there are other options too such as getting a flat mate or renting out a room in your house.

Transport – Write down every trip you take in a week. Study the list and see if there are any trips that you could do more efficiently or try to stack up. Try join a lift club to share the cost of travel to and from work, this can save you lots of money and be an extra source of income if it is your car you are using.

Food – We are all guilty of an unnecessary splurge at the grocery store. Try to cut down on the luxuries. Also make it a habit to check the prices of all of the items you buy and try opt for the generic house brand. Keep a look out for specials when you are at the shops. Another way to save money is to buy items that you use often in bulk – you usually get a cheaper price per kg or liter. Planning your meals is a great way to cut down on food wastage as well.

The SMALL stuff:

Daily habits: Cut down on those morning coffee and snack runs. Rather have coffee at the office or buy your own instant coffee. This will save you hundreds of rands per month. Think about, your R35 daily flat white is costing you over R700 per month…

Shopping: Do not waste money on items that you don’t really need. Think about buying secondhand items off Gumtree or Facebook marketplace. When the latest fashion trend drops, think about the cost versus the benefit of buying a new piece of clothing. Do you really need another t-shirt or pair of jeans? If you are struggling with debt, probably not.

Subscriptions: If you have a gym contract, are you using it? Do you need to use it? Maybe there are other ways for you to exercise. We live in a beautiful country with wonderful outdoor areas to exercise. Take a run in your neighborhood or go for a hike. Cancel magazine subscriptions and old golf course fees that are going to waste.

Step 5: The Side Hustle

Try to make some extra money. It is easy to say that you don’t have enough time, but perhaps there is something that you could do to earn an extra income. You could bake cakes, you could tutor, you could become a part-time Uber driver, a babysitter, a movie extra… Any extra money can be used to pay for some living expenses or to pay towards debt.

Step 6: Seek Help

If you have tried some of these tips and are still struggling to balance your debts, perhaps you need to chat to a professional. Debt counsellors have been trained to assist consumers with their debts. They conduct financial assessments which look at your entire financial situation, after which they are able to see if they can provide a solution that will make your life easier. Debt consolidation takes the pressure off by lowering the monthly debt repayment into a lower amount. Make sure you speak to a debt counsellor with the correct qualifications and expertise.