With festive season celebrations now a distant memory and all of the leftovers hopefully eaten, something still remains for the majority of South Africans - a looming credit card debt! It doesn't have to linger for long but getting out of credit card debt requires a realistic goal and a firm resolve. You will have to monitor your progress regularly to minimize your pitfalls and motivate yourself to keep on track.
Fight the temptation
The first thing that you need to do to get out of debt is to avoid the temptation of further using your cards. Take them out of your wallet and hide them away from yourself until the debt has been cleared. Paying for purchases with cash will help you consciously separate your needs from your wants.
Next, you need to prioritize your debts. Make a comprehensive list of your debts, outstanding balances, interest rates and so on. Then arrange the list in order of importance. Mortgage and vehicle payments are usually at the top of most lists as these provide you with basic shelter and transport. One popular strategy is to make the minimum payments on your credit cards with the lowest interest rates and maximize your payments on the credit cards with the highest interest rates. A different approach would be to pay off credit cards with small balances first, then cut up and cancel the card when it has been paid off. Most people only require one major credit card.
Reviewing monthly expenses and looking for opportunities to cut costs is another way to get out of debt fast. Tracking your expenditures for a couple of weeks allows you to calculate your potential savings in the future. You might be surprised at how much you can save making your coffee at home instead of picking up your cuppa joe on the go.
Formalising your strategy
After you have found channels that allow you to cut costs and have prioritized your debts you will be able to form a monthly spending plan. This plan should ensure that you are living within your means, while also providing a set timeframe in which you should achieve debt freedom.
Another course of action would be to get a debt consolidation loan or credit balance transfer. When used correctly these can be effective ways of getting out of debt. Be sure to investigate all terms, conditions and any hidden fees as well as ascertaining the overall interest savings you may realise.
The number one thing to remember when fighting to free yourself of debt is, of course, point number one: resist the urge to further entrench yourself in debt by using your card. Any progress that is made on other fronts will quickly be made invalid by accumulating more debt. If you need help eradicating your debt or any other financial advice, then let’s get in touch!