A recent survey of consumer debt has revealed that South Africans are trapped in the worst debt crisis yet, with more than 6000 new debt counselling applications per month.
The Credit Bureau Monitor compiled by the National Credit Regulator (NCR) shows that there are 18.84 million credit active consumer, and:
· 53.3% are in good standing;
· 46.7% have impaired records;
· 14.3% of the credit active consumers have a judgment listed on their credit profiles.
With figures like this, it's clear that most of us need help managing debt. Financial understanding and responsible management of money is a critical life skill and can make all the difference to the quality of an individual’s lifestyle.
Here's how to get out of the debt trap:
· Draw up a budget that lists your expenses against your income. Knowledge is also power for financial planning. If you don’t do a budget at least once a year, you won’t know if you have, or could get, any spare cash to increase your savings or reduce your debt.
Click here for a practical step-by-step guide to writing up your monthly budget.
· Start saving. This is the basis of good money management. Make saving for essentials such as an emergency fund, education policy or life cover part of your monthly expenses. If you're expecting a bonus, use it to repay debts rather than having a shopping spree.
Still having a hard time putting aside money? Figure out what's stopping you from saving here.
· Create specific financial goals that are realistic, achievable and inspiring. For example, if your short-term goal is to purchase a new car consider the installments, maintenance plan and petrol costs and weigh those in with income available at your disposal.
Keep track of the saving milestones you should be focusing on.
· Don't be afraid to ask for help. If you have no idea where to start with your debt repayments or you're completely overextended, speak to a debt counselor and try negotiating with your credit providers rather than waiting for a final letter of demand or facing repossession.
Click here to see the most common debt traps.
Another body that has been established to provide solutions to over-indebtedness is the National Debt Mediation Association (NDMA), which offers a free and confidential service offering advice and resources to consumers who are worried about their debt.
Also remember that you have the option of undergoing debt counselling if your credit providers cannot assist you. Once under debt counselling, you will be protected against legal action in terms of the National Credit Act (NCA). Being under debt counselling does not mean cancellation of debt but that a debt counsellor will negotiate on your behalf with your creditors.