Are you drown­ing in debt?

In­stead of ig­nor­ing the let­ters of de­mand, you must take ac­tion

Move! - - CONTENTS - By Pheto Ra­makobya

WHETHER it’s a credit card, bond re­pay­ment or even sim­ple store cards, more of­ten than not peo­ple have some sort of debt. How­ever, the prob­lem is drown­ing in debt in­stead of man­ag­ing it ef­fec­tively. Move! speaks to two fi­nan­cial ad­vi­sors, Lek­gowa Letswara from FNB and Rene Maritz from Lib­erty, on ways to help you re­cover your fi­nan­cial free­dom.

WHAT TO DO WHEN YOU OWE TOO MUCH

Rene says the road to fi­nan­cial free­dom is a long one with no short­cuts.

You have to start by draw­ing up a well planned bud­get and elim­i­nat­ing all unessen­tial ex­penses.

“Plan for the fu­ture and take con­trol of your fi­nances. We all need money to live, but tak­ing con­trol of your fi­nances in­volves more than just ask­ing for a raise. It in­volves mak­ing good de­ci­sions with the lit­tle you have, chang­ing bad habits and liv­ing be­low your means. The ul­ti­mate plan is to stop liv­ing from pay cheque to pay cheque,” says Rene.

WHAT TO DO WHEN YOU CAN’T PAY YOUR DEBT

Ask your­self some im­por­tant fi­nan­cial ques­tions re­lated to your needs: What kind of lifestyle are you lead­ing? Can you af­ford the lifestyle? What are your fu­ture fi­nan­cial goals? And is your cur­rent lifestyle lead­ing you closer to your goals or away from them?

“If you can an­swer th­ese ques­tions hon­estly and suc­cess­fully, then you will know your­self bet­ter and you will be able to take the next step, which is your fi­nan­cial plan,” adds Lek­gowa.

It is quite dif­fi­cult to pay your debt on time when you no longer have a job or any in­come com­ing your way. But Rene says ne­go­ti­at­ing with your credit providers for an in­stal­ment hol­i­day is one of the ways to help when you are in this predica­ment.

“Ne­go­ti­ate with your cred­i­tors to see if they are will­ing to give you an in­stal­ment hol­i­day. An in­stal­ment hol­i­day will give you one to four months re­lief from pay­ing your debt in­stal­ments. Some com­pa­nies will be will­ing to do that, as it will cost them more money to get third party debt col­lec­tors in­volved to get the out­stand­ing amount from you,” says Rene.

“Al­ter­na­tively, see if you can ne­go­ti­ate a longer term to pay off the debt. This will re­duce your monthly in­stal­ments. The point to re­mem­ber is to com­mu­ni­cate with the cred­i­tors, and show them that you are will­ing to pay them and not run­ning away from your re­spon­si­bil­i­ties. They will be more will­ing to agree to new terms.”

HOW TO KEEP AFLOAT IN FU­TURE

Be­ing debt-free is a lib­er­at­ing feel­ing, but it has its down­side. Don’t rush to clear your debts, make sure you keep a healthy debt.

Debt-free liv­ing might be an ideal way of life, there are costly con­se­quences in fu­ture. A web­site called The Jenny Pincher states, “Typ­i­cally, you have to use credit to build a solid credit his­tory, which means car­ry­ing some sort of debt, even if only tem­po­rary, is es­sen­tial. This might come as a shock, but a blank credit file can be costly when at­tempt­ing to set up ac­counts with non­len­ders. Land­lords, cell­phone com­pa­nies, util­ity com­pa­nies and some in­sur­ance com­pa­nies will run a credit check be­fore do­ing busi­ness with you; and un­for­tu­nately, no credit his­tory can be just as bad as hav­ing bad credit record.”

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