What should you do if you are struggling with debt?

If you are struggling with debt, ignoring the problem will only make it worse. To address the issue, you need to take action and create a plan to get out of debt. Follow these steps to make a realistic plan and achieve your goal of becoming debt-free:

Step 1 – Take stock of your problem

- Create a list of all your debts, the outstanding amount you owe, and the monthly repayment.

- To ensure that you have listed all your debts, obtain a copy of your credit report.

- Add up all the repayments and check the remaining income after these repayments have been deducted.

Step 2 – Consider if you need help

- Analyze your spending using your bank statements from the past six months.

- Determine which expenses you can cut and distinguish between your needs and wants.

- Use the Smart About Money Budget Planner to create a "bare-bones budget" with only essential living costs and eliminate non-essentials.

- If your income is insufficient to cover your bare-bones budget and repayments, consider selling your assets or making lifestyle adjustments to live within your means.

- Avoid using your retirement savings to pay off debt, as you may not have enough for retirement and may lose some of your savings to tax.

- If your repayments are still too high after lifestyle adjustments, you may be over-indebted and require a debt counsellor's assistance.

Step 3 – Find extra money for repayments

- Adopt your bare-bones budget and identify an amount to devote to paying down your debt faster.

- The more you can pay into your debt, the quicker you can reduce your interest and the interest charged on it.

- Inform your friends and family of your plans, and they might help you to spend less or offer ideas for reducing your household expenses.

- The bigger the sacrifice you make upfront, the shorter the pain will be. The faster you pay down your debt, the quicker the interest and the interest on interest will reduce.

Step 4 – Pay it down until you are debt-free

- Use the extra money to repay more than the minimum repayment on your debt each month.

- Decide whether you want to pay off the highest-cost debt first or the smallest debt first if you have more than one debt.

- Consider consolidating your debt if it's a good option.

- Keep paying more into your debt until you are debt-free.

Step 5 – Stay out of debt

- Set aside some savings for financial emergencies.

- Stick to your budget and live within your means to avoid borrowing again.

- If you do borrow again, make sure it's only good debt that funds a growing asset such as your home or career and future earnings.

​​If you have any questions about debt you currently have, please feel free to reach out to a member of the Libertine Consultants team. We are here to provide you with judgement-free support and advice. 

Need advice? We can assist with that too! Submit your inquiry to us via email advisors@libertineconsultants.co.za and we will provide you with sound insights on the best way forward. In the meantime, keep an eye on our YouTube channel to get more practical advice on managing the financial stress.