Get Out of Debt Now

Most of the common advice on debt is well-meaning but often unhelpful. Especially when debt is too overwhelming to even confront. You’re afraid to look at your bank account because it is a reminder that things are bad, and getting worse.

The latest data we have from the National Credit Regulator suggests 40% of South Africans are behind on one or more payments – in other words, credit impaired. DebtBusters reckoned in 2021 that consumers spent 62% of take-home pay on servicing debt. These are frightening figures. They depict a nation on the edge of personal bankruptcy, while government demands more taxes – you know that “Pay Your Fair Share” mantra from SA Revenue Services, as if everyone is living it up at the expense of an impoverished government.

Sorry, there’s not much sympathy left if you’ve been paying attention to the Zondo Commission reports and where all that tax money has been going. A little self-reflection and a few politicians in orange jump suits at this stage would be appropriate. But the fact remains that South Africans are in over their heads in debt and the situation is not getting better.

What to do

Confront the debt

Most debt counsellors will tell you to grab hold of your bank statements and go through it line by line looking for expenses to cut. It’s guaranteed you’ll find a few. Maybe R800 or R1,000 on dining out or streaming subscriptions you watch maybe twice a month. If you get really aggressive, you could probably slash R4,000-R5,000 off your expenses. That which you are unwilling to confront you cannot be cause over. It’s better to look at the horror that is your bank statement than ignore it.

Look for additional sources of income

Start moonlighting, rent out a room in your house, get freelancing (whether it is selling, coding or writing). This is actually much easier to do than most people assume. There’s plenty of people – even in your own circle – looking for some paid help. That might add another R4,000-R5,000 a month.

Turn the debt ship around

With step 1 and 2 you’ve already seen perhaps a R8,000-R10,000 turnaround in your monthly cash flow. This is proof that the system is working. Maybe you only save R500 or R1,000 in the first month and you don’t see any extra income from freelancing until three months later. Take this as a win. Any progress in reducing debt is good.

Stay in communication

If you are in deep trouble, don’t do what most people do in this situation and cut communication. In fact, communicate more. Phone the bank, explain the situation and try to get them to spread the debt out over a longer period or reduce interest rates. You’ll be amazed how staying in regular communication with creditors puts them at ease and builds trust in you.

Pay more than the minimum

When your cash flow improves, start paying off more than the minimum monthly repayments. For example, if you have a R1 million house and you’re paying R10,000 a month in instalments over the next 18 years, you can shave this down to just over 14 years if you increase your monthly repayments by 15%. You’re buying time and freedom.

Start saving

Start saving right away. Buy some bitcoin, or stocks or put cash away in an interest bearing account, even if it’s R1,000 a month. Do this immediately. You will be amazed how the savings habit consumes you. You start to see light at the end of the tunnel. Where do you get the R1,000 a month to save? Well, start trimming expenses.

Don’t go back into debt, whatever the temptations

This is like breaking a drug habit. Just say “No!” to more.

Is there any time when going into debt is acceptable?

Yes, if you invest in an asset that generates a return greater than the cost of the debt (like Rich Dad Poor Dad). But that’s a subject for another day.

Contact 80eight. If making or moving money (including stablecoins) is your game, we’ve got you covered. Let us guide you on your journey to debt-free prosperity.