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You can be debt-free

Tips to keep debt from swallowing your hard-earned money.

Many of us believe that the idea of being debt-free is a pipe-dream, an unachievable feat we think of now and then.

It can be done. You must just want it badly enough and be prepared to do something about it. Like anything worthwhile in life, it takes dedication, hard work and discipline.

Any plan to become debt-free needs to start with a budget, as well as a detailed list of all your debts. You cannot allocate funds to pay down debts if you don’t know how much you have available and can afford.

There are different approaches to settling debt: You can start by settling the debt with the highest interest rate on the outstanding balance, or you can arrange the outstanding debts from the smallest to the largest and start by settling the smallest debt first. The first approach is financially the more efficient, but the second approach may be more successful from an emotional point of view. The satisfaction of crossing off a debt from your list is liberating. This may keep you motivated to take on the rest.

Keep in mind, that as soon as you have paid of the first debt, this debt’s monthly repayment gets allocated to the next debt item on the list. As time goes by, your monthly payment towards settling your next debt on the list will gradually increase as previous debt repayments have been accumulating.

Remember, we mentioned that it takes dedication to remain debt free? Here are a few tips to keep debt from swallowing your hard-earned income and savings:

  • Have a monthly expense budget;
  • Stick to your budget and don’t be tempted to overspend – remember the commitment and the prize at the end: being debt-free;
  • Only use you credit card if you settle the full balance every month – in this way you will not incur interest on you credit card purchases;
  • Pack a lunch box for work for the next day – it’s probably healthier and saves money if you don’t buy food from the office canteen or a pie and cooldrink from the filling station’s convenience store;
  • If you’re fortunate enough to have a canteen that is funded by your employer, where food can be purchased for less than at a store, consider taking food from the canteen home for supper;
  • Allocate a bonus or thirteenth cheque to settle debt;
  • Allocate your annual increase towards settling debt;
  • Eat before doing your monthly or weekly grocery shopping. You tend to buy more items than what you have on your grocery list when you are hungry;
  • If you have small children and the aisle of temptation is a nightmare when you are waiting in the queue, give each child a ‘shopping allowance’ – this teaches them to learn to use their money to buy sweets or toys etc. They will also learn to save (delayed gratification) if they want something that is more expensive, so they can save their money and add it to their next allowance;
  • If you have a pantry, consider buying non-perishable products in bulk to make use of reduced prices;
  • Browse through the marketing brochures in your weekly local newspaper for specials;
  • Use the internet to do research when purchasing new appliances;
  • Sell any unused appliances or sporting equipment online or through apps such as OLX or Gumtree;
  • Have a garage sale to get rid of ‘stuff’ you no longer need or use, and get your children involved;
  • Consider giving your children a substantial monthly allowance with which they can buy everything they need, such as toiletries, clothes etc. It will help them to learn to become budget- and saving savvy;
  • Consider school fees. The added value of having your children attend a private school may not be worth the premium you pay on school fees;
  • If the discount for paying your school fees upfront annually is worthwhile, it may make sense to use your December bonus for this purpose.

ADVISOR PROFILE

Martin de Kock

Ascor® Independent Wealth Managers

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