Managing your debt in a recession

Are you in debt or struggling to make it through the month on your salary? Then you need a plan of action!

Stop and evaluate the options available to you on how to get out of this debt sinkhole. If left unattended, debt will only get worse and may land you in serious financial trouble. Nobody  wants that to happen!

Here are seven helpful tips to get out of debt:

Step 1: Acknowledge Your Debt

Admit to yourself that you are in debt! This is the first step to dealing with this unfortunate situation. It is also a great way to begin finding a permanent solution to tackle this difficult situation.

Step 2:  List Your Income and Expenses

After acknowledging the problem, write down a list of your incoming funds versus your expenses. This will help you get an exact view of what you are spending money on, both essential and frivolous. This will help you better evaluate where you can make cutbacks.

Remember, it’s imperative that you include everything in the list, from big debit orders (bonds, rent, car repayments, etc.) to the smallest item on your shopping list.

Step 3: Maximise Your Income

Make sure that you are being paid exactly what you are entitled:

  • If you’re recently unemployment, make sure your UIF or pension fund is paying out. If not approach the relevant UIF, labour or welfare offices to enquire about this.
  • If you are co-parenting and not receiving maintenance, try to get legal assistance to help resolve this matter.
  • If you live with adult children, who are employed, ask them to contribute towards household expenses. This is also a good way for them to start learning how to be financially responsible.

Step 4: Make Cutbacks to Reduce Your Expenses

  • Sit down and determine exactly where you can cut back on your expenses. Evaluate your transport costs; maybe you could take a bus or taxi instead of using your car or consider carpooling to work? Cancel or adjust all non-essential expenses like  DSTV, magazine or newspaper subscriptions, cell phone contracts and gym memberships. Stop buying take-aways and start packing lunch to work, besides saving money, a packed lunch will allow you to include all the healthy food groups  that you need.
  • Do you have adequate health cover? If your current medical insurance is too expensive, switch to one that is more affordable.  It is the perfect time to evaluate the different choices that are available from various medical insurers.
  • Can you afford the place you are living in or the car you are driving? If not, it could be time to start looking for something a little more affordable.

Remember, these changes don’t have to be forever, just until you’ve reached your goal.

Step 5: Prioritise Your Debts

Find out whom you owe and how much you owe them. Draw up a list and arrange all your creditors according to their order of importance, beginning with the high priority ones. Make certain that you don’t ignore or miss repaying any of your creditors on the list.

Priority debts are described  as those unsecured debts, which are important enough to receive first preference on the debt repayment list.  The following are examples of priority debts:

  • Rent or bond
  • Water and lights
  • Rates and taxes
  • Traffic fines
  • Vehicle repayments

 Step 6: Contact your Creditors

This step is the most daunting, as you will have to contact all your creditors. Start in order of priority as you have written down on your payment plan. You may need to see your creditors face to face or to write them an e-mail explaining your predicament as well as your solution. Remember to be honest and upfront about why you are in debt and how you’re planning to solve this (if you’re lucky, they might even be willing to help you by reducing your repayments further).

Step 7: Work Out a Long Term Debt Strategy

Seeing as you are well on your way to settling your debts, by making small payments,  the challenge you now face is to stay on your resolve and ensure that you do finish paying  off all your debts, if you are struggling to do it on your  own,  you could also consult a debt manager to assist with your finances. A debt manager will be able to help you consolidate and pay off all your debts with one creditor, lifting some of the financial strain.

Remember that debt can be both good and bad, depending on how you use it. If you use debt for the right reasons and pay it off promptly without letting it spiral out of hand, debt can work wonders for you. However, if you misuse it and bury your head in the sand, it will keep growing until it becomes a financial nightmare.

Disclaimer: This is  Guest Post provided by Hippo Comparative Services. The information provided in this article is for informational purposes only and does not constitute legal or other professional advice. Hippo Comparative Services (Pty) Ltd does not accept any responsibility for any act, omission, loss, damage or the consequences thereof by the dependence by any person upon the contents of the article.

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