Sandy’s Place – South African Lifestyle Blog
All things adulting,  Finance

How to get out of debt

In case you have been living underneath a rock, July is national savings month and we have covered the reason why we are broke. Now we need to figure out how to get out of debt. This post needs to start with a disclaimer: I could give you all the cheat notes to getting out of debt, you could read all the self-help books in this category. However if YOU do not decide it’s time to make a change and do the hard work, then nothing will change- it will only get worse. In other words dear reader roll up those sleeves and let’s get to work.

Work Desk

How much is it?

Get out some comfort food or a strong cup of coffee then get to work. Lay out all the paper work and do the sums and find out exactly how much debt you in. Honestly, it might not be that much but the fear of it has made it worse than it is. Conversely it is that much, either way knowing it, having an actual amount is the beginning of the recovery process.

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Now feel free to have a 5 minute melt down

 

Speak to your lender

Uhm what? Yes you read correctly, you know that number you have been avoiding? I am telling you to call it. Speak honestly to them and make a realistic payment plan. Whilst you there, negotiate a discount. Talk about having your cake and eating it too. What many people fail to realize is that depending on the payment plan you might qualify for a 20% discount sometimes even more. Once you have set up a payment plan it’s really important that you honor it and follow it through.

Side note: this step puts the power back in your hands, you are in charge of your debt instead of being pestered and getting those dreaded lawyer letters (which come with their own fees)

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Compromise time

So now you know how much you owe, you have set down a payment plan and maybe gotten a discount. You need to set a deadline of how long it will take you to get out of debt whether- it’s a year or a bit more. In this time you will have to sacrifice, yes Susan that means put down that latte (buy and make your own), don’t order that amazing Peruvian weave (wash and re -wear one of your many others).

Reward yourself

If you have set yourself a timeline then set yourself a reward, that’s also within reason. If you reach the target reward yourself, if you miss it then the reward money goes into your savings.  Finally be honest with yourself. Why did you get in debt? Was it student loans or something of your own doing? If it’s the latter then you need to start practicing better spending habits. It’s ok to ask for help.

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Live under your means
This is definitely something I want to write further on. We live in a culture where we believe in using all our income. Research shows that we are actually meant to be spending 50% on living expenses, 20% on savings and 30% on lifestyle expenses.  I would like to encourage you to live beneath your means not just whilst you getting out of debt- even when you are financially stable.

What are some tips that you have used to get out of debt? Do let me know I love hearing from you. Do not forget to subscribe ( its free!!) you can be the first to know when I post.

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