Come clean with your debt

The holiday season is fast approaching, and already we are bombarded with enticing 50% discount sales and the “buy 2 get 1 free” offers! It is so hard to resist spending a little extra on that special person, especially when faced with beautifully decorated shop windows and last minute holiday deals!

Getting into debt is easy, but getting rid of it, not so! It is no wonder that we suffer from January blues! Apart from covering our Christmas debt, we are still faced with school fees, insurances, medical aids, and the list goes on and on…

“ Credit buying is much like being drunk. The buzz happens immediately and gives you a lift… The hangover comes the day after.”

American Psychologist and author, Joyce Brothers

If you are serious about getting rid of debt, my best advice is to change your attitude to money.

A good starting point is to be honest with yourself. We are creatures of habit, creatures that develop habits that get us into debt – and then habits that prevent us from getting out of debt. Research shows that people avoid talking about money to avoid facing reality. So, sit down and have a heart to heart conversation with yourself. Come clean about just how much debt you have.

Then ask “Why am I in debt?” We often don’t buy things because we need them, but because we believe it will make us happier or appear more successful; a new car represents respect and popularity for example.

Next, consider what your ideal life would look like. Have a plan for your life – and your happiness. Align spending with your life plan and disregard the fluff, the buzz items that make you feel good for a short period of time. The only way to make a real change is to commit to changing your lifestyle – and your decisions around what you spend your money on.

Now, prioritise your debt. Address the highest interest rate debt first, such as your store card, credit card or overdraft. By targeting smaller debt as a starting point helps us gain momentum and increases our confidence in the process.

If you are considering consolidating your debt, remember that you must reduce monthly expenses to meet the debt repayments. Although the loan is normally extended over a longer period and your monthly payments will be less, the overall saving may not be as big as you expect. Anticipate initiation fees and added interest on the loan, but as long as you do not revert back to old behavior, this may be a good option as the debt repayments are more manageable.

Remember that you are your greatest asset! Consider increasing your income potential by extra part-time work, renting out a room in your house or investing time in upgrading your skills and competencies.

Lastly, ask for help. Debt can be an overwhelming experience and often we are so emotionally invested that it is hard to think clearly and make rational decisions. Get in touch with a certified financial planner who can objectively help you to plan a solid debt strategy.

Six to-dos’s to get debt free:

1. Come clean with yourself. How much debt do you really have?
2. Stick to your plan. Write down what your ideal life would look like.
3. Keep track of your monthly expenses.
4. Pay your debt from the highest interest rate to the lowest.
5. You are your greatest asset. Increase your earning potential by upgrading your skills.
6. Ask for help. A certified financial planner can help to develop a realistic debt strategy.

This Christmas season, give yourself the best give you can – a debt free January to start of 2018!

Kim