By Dr. Eugene Brink
December is over and you have probably piled on some ugly debt through vacationing and splurging on Christmas. Perhaps this debt already existed before you exacerbated it with your December spending.
First off, you can find solace in the fact that you are certainly not the only one. Many people in South Africa and in fact, around the globe, fell into the same trap and now have to deal with a mountain of debt and responsibilities on a thinly-spread January budget.
Don’t feel too guilty. There are ways to whittle down this debt but they will require some motivation, diligence and discipline. In the end, once this debt is reduced you will feel more free and confident. So read on if this is how you would like to feel in 2019.
- Earn more money
“Put in some overtime; get a part-time job; sell some of your belongings – do whatever it takes to bring in more cash now. Apply all of these extra earnings towards your debt,” writes Erin Huffstetler on the personal finance website The Balance.
This sounds like a no-brainer, but for most of us this is quite challenging and easier said than done. Many of us are already overstretched as far as our time and energy go and it is extremely tempting to use the extra money to buy new clothes, pay school fees or decorate the house – instead of using it for a mundane purpose such as paying off debt, which cannot be seen anyway.
Yet, it is not impossible and most of us could, with some due effort, make this work. Selling belongings certainly doesn’t mean getting rid of items you really need. Rummaging through your garage might, however, yield some valuable things you really don’t ever use. Why not earn some extra cash whilst cleaning a place in dire need of some tidying-up? You could also get rid of unwanted gifts by selling them.
Many of us have more than one skill that could be put to good use. Ruminate on how you could use your current skill set to make extra money, or learn a new skill. Teachers could give extra classes in their subjects and the freelance economy is quickly supplanting full-time staff. There is a myriad of opportunity and it could be the start of a whole new career or business venture on the side.
- Change your spending habits
National Debt Advisors (NDA) advises that if you are over-indebted and want to do something about it, don’t stick to what you’ve been doing. They wisely suggest you start with the little things. If you buy coffee and lunch everyday, try making your own and stick to making such purchases once a week.
The little expenses matter, but so do the big ones. For instance, put off buying a more expensive new car until your debt is settled.
It probably isn’t necessary to eliminate all luxury spending because life is also for living. But sit down and make a list of purchases that could simply be done more cheaply. According to Huffstetler, this means shopping smarter, too. “Challenge yourself to get the best price possible on everything that you buy. Look for sales and do whatever it takes to get a deal. Make a game of it and see just how little you can spend on necessities!”
Lastly, put away your credit cards and spend more time at home instead of eating out and shopping. It might be a little less fun-filled, but it eliminates many temptations and lowers your fuel expenses. You’ll thank yourself later.
- Pay off the most expensive debt first
Stephanie Steinberg, staff writer at US News and World Report, says we should sort our credit cards interest rates from highest to lowest and tackle the card with the highest rate first. “By paying off the balance with the highest interest first, you increase your payment on the credit card with the highest annual percentage rate while continuing to make the minimum payment on the rest of your credit cards,” writes former My Money contributor Hitha Herzog in the same publication.
This advice is unequivocally echoed by NDA, but the caveat is to not fall behind on your other obligations.
- Make it fun
As great as settling debt can be, Steinberg says you won’t pay off your debt any faster if you view it as a form of punishment. Reward yourself within reason (e.g. going to the movies) for reaching certain milestones and see such rewards as an incentive.
Erin Huffstetler, 10 December 2017, “7 ways to redirect money to pay off your debt”, https://www.thebalance.com/how-to-eliminate-debt-quickly-1388089.
National Debt Advisors, 12 November 2018, “The do’s and don’ts of getting out of debt quickly”, https://nationaldebtadvisors.co.za/get-out-of-debt-quickly/.
Stephanie Steinberg, 10 May 2017, “10 easy ways to pay off debt”, https://money.usnews.com/money/personal-finance/articles/2017-05-10/10-easy-ways-to-pay-off-debt.